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Government raids your pocket once again

Treasury Cabinet Secretary Henry Rotich.. [David Njaaga, Standard]

The taxman is eyeing a piece of the Sh3 billion Safaricom makes on a single weekend from gamblers.

The Kenya Revenue Authority (KRA) will aggressively come after employees’ benefits and the net result is that you will pay taxes on meals, airtime, cars and house allowances that you receive from your employer.

Treasury has also altered the excise duty rate, pushing up the prices of beer, bottled water, cigarettes and fruit juices in what is seem as efforts to keep up with the rise in the price of goods and services, or inflation.

The telecommunication company makes the money from fans of the popular English Premier League.

Mobile transactions - a critical payment platform for gamblers - has already been hit with higher excise duty which saw the cost of sending money increase to 12 per cent from 10 per cent. The duty became applicable on July 1.

Money transfer

But with inflationary adjustment of about 5.2 per cent, the Government will now snatch up an estimated 12.7 per cent for every transaction. This will hit ordinary Kenyans more as they are the ones who frequently use such mobile money transfer services as M-Pesa, Airtel Money and Equitel.

“If you receive airtime that is above Sh3,000, that will be taxed,” said a KRA official, who could not be quoted as he is not authorised to speak to media.

He said that airtime was one of the key taxable ‘non-cash benefits’”. Should the other non-cash benefits also exceeds Sh3,000, they will also attract the taxman’s knife.

For vehicles, an employer will pay taxes depending on engine size and value of the car. However, the use of the vehicle for personal purposes will not be subject to taxation.

If you receive per diem above Sh2,000, the extra amount is subject to taxation.

Other items whose cost will go up as excise duty, or sin tax, is adjusted owing to rise in inflation include beer, cigarettes, fruit juices, bottled water, and motorcycles.

Biggest casualties

Cigarettes and motorcycles are the biggest casualties, with their excise duty being increased by 5.2 per cent after the Government turned a deaf ear to manufacturers and imposed new taxes that kick off next month.

Excise duty rates were increased by five per cent, with water and non-alcoholic beverages attracting the least adjustment at four per cent, fruit juices at five per cent and alcoholic products.

“This change is effective August 1, 2018, and it applies to the above excisable products delivered from manufacturing facilities from that date. In addition, all imports of excisable goods cleared for home use from that date shall attract new excise duty rates,” audit firm PricewaterhouseCoopers said in a note to its clients.

Under the Finance Bill, 2018, the CS has proposed to make the adjustment annually unlike, previously when the adjustment was required to be made every two years.

Inflation was kept in check last year after the Government subsidised sugar, milk and maize meal. Inflation in Kenyan has a history of rising to a high of 16.8 per cent.

The Central Bank of Kenya is, however, required to keep an inflation target range at 2.5 to 7.5, to ensure the economy does not slow down too much or goods become unaffordable.

Analysts have argued that adjusting taxes to inflation is unfair to workers whose pay is not necessarily improved by the rise in inflation.

According to the Institute of Economic Affairs, over seven years, nominal wages among the middle class have risen by Sh42,000 a month, yet when adjusted for inflation the real money that ends up in your pocket has reduced by Sh3,000.

Treasury CS Henry Rotich has, however, spared petroleum products from the excise duty adjustment to save the consumer from high-cost impact since they have been earmarked for an increase in value added tax.

Excise duty

“Petroleum products, which also attract excise duty at specific rates, have not been affected by the adjustment. This could be due to the anticipated increase in price due to introduction of VAT in September 2018 with the expiry of the transitional VAT exemption,” PWC said.

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