Kenyans face a record hit to living standards after the courts last week paved the way for the implementation of the controversial Finance Act, 2023, signalling more pain for consumers at a time inflation has eroded incomes and purchasing power has been dented.
The Ruto government has defended its new taxes, which are expected to worsen the raging cost of living crisis.
Below is a breakdown of how the taxes will affect you:
The Act has introduced a monthly Affordable Housing Levy, where both employees and employers are both subject to the levy at 1.5 per cent of the employee’s gross salary.
The burden will be on the employer to deduct and remit the levy within nine working days after the end of the month. Employers who fail to comply with this provision shall be penalised at two per cent of the unpaid funds, for every month the funds remain unpaid. The levy is to fund the State's affordable housing agenda.
Fuel (petrol, kerosene, and spirits)
The Act doubles the Value Added Tax (VAT) rate for fuel from eight per cent to 16 per cent, adding on to the cost of energy pain affecting consumers. As a result of the doubling petrol prices are retailing at nearly Sh200 hitting motorists hard.
15pc excise duty on mobile money transfer services
The Act increases the Excise duty on fees charged for money transfer services by cellular phone service providers or payment service providers like Safaricom and Airtel. Safaricom last week revised charges for M-Pesa transactions, SMS, call, and data following the Court of Appeal’s decision to lift orders suspending the implementation of the Finance Act. Safaricom consequently said the changes are effective beginning July 29, in line with the new excise duty rates in the Finance Act.
“Effective July 29, 2023, we will be reviewing our call, SMS, data, home fibre, and M-Pesa pricing to reflect the increase in the excise duty rate on fees charged on mobile money transfer services from 12 per cent to 15 per cent,” announced Safaricom.
In the changes, mobile money transfer charges have gone up by three per cent, while charges on calls, SMS, data, and home fibre will decrease by five per cent (from 20 per cent to 15 per cent).
Imported sugar and fish
The Act introduces a 10 per cent duty rate on imported fish and a new rate of Sh5 per kg of sugar excluding imported sugar by a registered pharmaceutical. This is expected to impact the prices of the two crucial commodities.
The Act now says that the income of members’ clubs or trade associations will now be taxable. This is expected to hit Chamas hard.
Turnover tax on SMEs
The Act introduces a revised threshold for turnover tax from between Sh1 million and Sh50 million to Sh1 million and Sh25 million. It also increases the turnover tax rate from one per cent to three per cent.
This will mean that SMEs with income above Sh25 million currently registered under the TOT regime will now be required to pay tax at the corporate rate of 30 per cent on taxable profits. Further, taxpayers eligible for TOT will be subject to the same at 3 per cent.
The construction and building materials sector is expected to be hit hard after imported paints, varnishes and lacquers of heading 3208, 3209 and 3210 were slapped with a new 15 per cent duty rate.
Powdered juice has also been hit with a new duty rate of Sh25 per kilogramme. This is expected to impact on the prices of juices.
15Pc Excise duty on betting advertisements
It also introduces a 15 per cent fee charged on advertisements on television, print media, billboards and radio stations on alcoholic beverages, betting, gaming, lotteries and prize competitions. The move is expected to hit hard media companies.
Daily remittance of excise duty
The Finance Act 2023 now requires manufacturers of alcoholic beverages to remit excise duty within 24 hours upon removal of the goods from the stockroom.
The Act also requires betting and gaming service providers to remit excise duty before the end of the following day.