Tax after tax: Inside new Gov’t revenue plan targeting car owners, schools, alcohol consumers

Despite the uproar that greeted the Finance Act, 2023 which imposed additional taxation measures on an already heavily taxed population, it appears the government is not done yet; it is still out to inflict more pain on Kenyans with further raids on their pockets in a bid to finance its development plans.

The Medium Term Revenue Strategy covering the 2024/2025, 2026/2027 financial years is undergoing public participation, and Kenyans have until October 6th this year to submit their views.

The revenue plan proposes to review the VAT rate and align it with that of other EAC member states which are at 18 per cent to ensure the tax framework is consistent; this, if implemented, means an increase in the cost of all manufactured goods including consumer goods.

Further proposals include the removal of VAT exemptions and zero rating of goods, as well as reintroduction of a minimum tax regime to deter companies and other entities from tax evasion through under-declaring.

Despite the Competency Based Curriculum (CBC) engaging pupils in more extra-curricular activities, the government has proposed the introduction of VAT on services provided by the institutions that are not directly linked to education; this could include swimming and other non-educational activities.

In a move that would squeeze salaried Kenyans further, the National Treasury is also seeking to eliminate personal reliefs that arise from, among others, insurance and medical.

Motor vehicle owners will also be punished for owning a car, besides numerous taxes they pay including fuel levy, insurance cover, and road levy.

The new tax plan seeks to introduce an annual motor vehicle circulation tax that will be paid during the acquisition of insurance cover; the vehicle's engine capacity will determine the tax amount payable.

And as the government moves to align its action to also aid in mitigation effects of climate change, the National Treasury has proposed an increase in excise taxes on vehicles that use fossil fuels including tractors, forklifts and excavators among others.

Excise duty on petroleum products will be reviewed while the same will be introduced for coal.

Despite the government's push to have farmers increase their activities to facilitate food security, the exchequer is seeking to impose a not more than five percent tax on agricultural produce.

And in what the government says is a move to discourage the consumption of alcoholic, tobacco and sugar sweetened non alcoholic beverages which pose a great health risk, the National Treasury has proposed to increase excise duty on the commodities, an action that is likely to see the prices shoot. Alcohol consumers will pay taxes commensurate to the alcohol content of the drink one enjoys.

In mounting a defence for the strategy, National Treasury Cabinet Secretary Prof. Njuguna Ndung'u says it will help the country raise the funds needed for the implementation of the Bottom Up Economic Transformation Agenda (BETA) and also align Kenya’s revenue yield to the East African target of 25% of the GDP.

Currently, the country's collection is at 14% of the GDP; Prof. Ndung'u says ordinary revenue will rise to 5% if the strategy is adopted.

Even as Kenyans submit memoranda on the proposals, the plan is expected to generate heated debate since the economy is yet to bounce back since Covid while the paycheck thins by the day.