Finance Bill: Kenyans vent as officials toil to defend proposals

Housing and Urban Development Principal Secretary Charles Hinga when he appeared before the Senate Devolution and Intergovernmental Relations committee over the proposed house levy in the new Finance Bill 2023. [Elvis Ogina, Standard]

Public participation sessions on the Finance Bill 2023 were marked by intense opposition to some of its proposals even as government officials defended them.

The Bill contains 84 clauses that seek to amend various tax laws and other related statutes.

Key among the contentious proposals is the three per cent housing development levy that the Bill proposes to be imposed on salaried workers and employers. Under this plan, President William Ruto seeks to put up 250,000 affordable housing units.

Appearing before the Departmental Committee on Finance and National Planning earlier this week, Law Society of Kenya (LSK) President Eric Theuri opposed the proposal noting that the increase in taxation should not just be about revenue generation.

Theuri faulted the imposing a mandatory contribution that reduces the earnings of Kenyans, noting that the move also breached provisions of Article 201 of the Constitution. He argued that a contribution should be voluntary.

LSK, which appeared alongside WestMinister Consulting and Anjarwalla and Khanna Advocates, also opposed the proposal to tax the growing content creation and creative sector in Kenya through the withholding tax mechanisms at the resident rate of 15 per cent payable to KRA. They proposed that the withholding tax be reduced to five percent to allow growth in the sector.

Housing Principal Secretary Charles Hinga has, however, defended the housing levy, saying it is not a tax but a saving.

Hinga explained that the fund confers a direct right to either get an affordable unit or, after seven years if one does not want it, they get their money plus returns.

"The housing levy should be driven by law and not voluntary because if it is driven by law, we can call investors because there's an assurance of collecting money even after three years, so long as the law is there," said Hinga.

The Kenya Association of Manufacturers (KAM) has also frowned upon the proposal by the government to charge excise tax (Sh5 per kg) on sugar, noting that the move will lead to an increase in the price of sugar and worsen the cost of living.

Sugar currently retails at Sh200 per kg and KAM further argued that imposing excise duty on sugar will make the products manufactured using sugar uncompetitive because other EAC states do not impose excise duty on sugar.

KAM argues that a proposal for a mandatory deposit of 20 percent of disputed tax with the KRA when appealing a Tax Appeals Tribunal (TAT) decision will negatively impact the working capital and cash flow since the money will be held in escrow without the capacity to earn any interest, given that tax disputes can take years to resolve.