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Don’t make tax burden too heavy for Kenyans to bear

EDITORIAL
By The Standard | May 10th 2020

The National Treasury has made proposals to impose punitive taxes on a segment of Kenyans who are vulnerable and should instead be protected during these harsh economic times.

In the Finance Bill 2020 tabled in Parliament on Wednesday, the Treasury proposes to subject pension paid to people over 65 years to income tax.

Income by the National Social Security Fund (NSSF) will also be taxed if the proposals sail through in Parliament and President Uhuru Kenyatta endorses them.

The Treasury has also not spared Kenya’s lowest earners and wants to impose income tax on overtime, bonuses and retirement benefits made by people -- in the lowest tax band -- who earn below Sh12,298 per month.

While their salaries are currently subject to income tax, the money earned while working long hours for an employer rewarded through bonuses as well as retirement benefits are not taxed, affording them a slight breather.

The government has for years effected cash transfers to vulnerable Kenyans, such as orphans and vulnerable children (OVC), persons with severe disabilities and the elderly.

It has recently upped this following the outbreak of coronavirus and while it faced a lot criticism owing to its flaws, the programme shows a government that on one end has the interests of citizens at heart.

However, some of the proposals in the Finance Bill might negate the efforts the government has put in place to support vulnerable people.

Imposing more taxes on people who are barely making ends meet might mean relegating them to the point where they too will start asking for government help.

While these segments of Kenyans would, under normal circumstances, be classified as vulnerable, Covid-19 has made their situation worse.

In the case of the elderly, they are at high risk should they contract the disease and the earnings of the low income earners are no longer guaranteed as companies implement cost-cutting measures as the impact of the economic slowdown hits home.

Other proposals that will push up the cost of living for Kenyans include imposing 14 per cent value-added tax on cooking gas.

The proposal follows last year’s imposition of VAT on other petroleum products, which was however at a lower rate of eight per cent. The move could push more Kenyans to using kerosene and charcoal in their kitchens, which are harmful to their health and the  environment.

They are also not cheap following government’s measures to stop adulteration by hiking kerosene costs and protecting Kenya’s environment by banning in government forests.

Scrapping the tax relief Kenyans get while saving for homes through Home Ownership Saving Plans also exposes government agencies that are pulling in opposite directions, with the Ministry of Transport and Housing pushing for affordable homes while Treasury is making it harder to own a home.

While the push by the government to increase tax revenues is understandable considering the Herculean tasks that lay ahead, it should perhaps consider taking a hit and in the short term accept that tax revenues might not get to the levels it expected.

The National Treasury should consider the situation that Kenyans find themselves in and instead of taxing them to their last cent, ease up on some of the proposals that appear bent on pushing Kenyans to a corner.

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