Treasury CS Yatani sneaks back rejected tax proposals in 2020 Finance Bill
Treasury Cabinet Secretary Ukur Yatani has set himself for a showdown with the National Assembly after sneaking back proposals rejected by Parliament barely a week ago.
In his presentation of the 2020, Finance Bill, Yatani seeks to lift exemptions on key products and services including levying tax on liquefied petroleum gas (LPG) and bonuses paid to low income earners.
The National Assembly had pushed back the attempt to lift the exemptions at the end of April by rejecting proposals submitted via the 2020 Tax Laws (Ammendment) Bill sighting higher costs and reduced incomes on Kenyans.
Treasury now seeks to have LPG as a vatable good while charging pay as you earn (PAYE) on overtime allowances and bonuses earned by low income earners that are less than Ksh.12,298.
Other changes sneaked into the bill include taxing income generated from home ownership savings, income earned by the National Social Security Fund (NSSF), monthly pension pay-outs and the dissolving of expenses including listing fees and social investment from the computation of corporate tax.
Industry stakeholders have already rejected the proposal sighting higher energy costs, a reduction in payments to retirees and the lower activity at the Nairobi Securities Exchange (NSE).
“The proposed VAT charge on LPG will also increase the price of cooking gas which contradicts government efforts to shift consumers from the use of wood fuel,” tax experts at KPMG said in a note.
CS Yatani attempt to sneak back the ammendments represents Treasury’s latest push to slam the brakes on exemptions which it have been blamed for lower revenue collections.
According to data from the Treasury, the lift on what it termed as unnecessary tax exemptions would realize gains upwards of Ksh.127.8 billion on an annual basis.
“The exemptions that are not achieving their intended purposes and are significantly eroding the tax base and should be removed,” CS Yatani told the National Assembly Finance and National Planning Committee in April.
The 2020 Finance Bill is geared at unlocking more revenue streams even as the exchequer comes under the pressure of lower collections from the economic dip brought about by the Covid-19 pandemic.
Tax revenues are expected to come down significantly to Ksh.1.62 trillion in the financial year commencing in July from an original target of 1.88 trillion at the start of the current budget cycle.
New entry ammendments to the bill meanwhile include the raising of ceiling on residential income tax to Ksh.15 million which will lower tax obligations cushioning against the effects of dipping.
The digital market place is expected to come under the tax net in the next financial cycle in line with the introduction of provisions to tax the market in 2019 with the tax charged at the rate of 1.5 percent on gross transaction values.
Moreover, private equity and venture capital firms utilizing public funds are expected to come under the realm of regulation with the bill proposing licensing by the Capital Markets Authority (CMA).
Other ammendments will see the cost of some beers come down with the bill proposing a higher excise duty coverage for beers whose alcohol content exceeds 10 percent from the current rate of eight percent.
The price of some spirits is however set to go up as the bill proposes to lower coverage to products with alcohol content above 8 percent from the current 10 percent.
The bill is now the subject of approval by the National Assembly having gone through the first reading stage on Wednesday.
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