The Departmental Committee on Finance and National Planning has commenced week-long public hearings on the Finance Bill, 2023. The Bill has a timeline of approval of 30th June to coincide with the enactment of the Appropriation Law, 2023.

Speaking this morning during a preparatory meeting with the Committee Members, the Chairperson, Hon. Kimani Kuria underscored the importance of the exercise and called on the legislators to remain committed to the cause even though the exercise may force them to sit long hours given the interest the Bill has generated from Kenyans of all walks of life. 

“Hon. Members, the business before us for the next two weeks is critical to the economic future of our country. I seek your indulgence to endure long sittings to listen in to the numerous submissions we project will be made on this proposed legislation”, the Chair told the Committee. 

The Chairperson was quick to note that the proposed law seeks to expand the tax base and to allow the Kenya Revenue Authority (KRA)to generate more revenue especially from areas that have traditionally not effectively participated in contributing to the country’s tax basket. He cited a departure from the past on the Bill, which does not propose any increased taxation on alcohol and cigarettes as has been the case with previous Finance Bills.

The Bill which contains (84) clauses seeks to amend various tax laws and other related statutes to better the operations of financial sector as well as enhanced measures for raising national revenue.

This afternoon, entities that got the first bite of the cherry were the Law Society of Kenya, WestMinister Consulting and Anjarwalla & Khanna Advocates who gave their misgivings on a number of provisions contained in the proposed legislation.

The officials from the three entities told the MPs that though they were not opposed to the attempts by the government to expand the tax base to meet its obligations, there was need to ensure that the tax burden is shared equally and that increase in taxation is not just about the country generating revenue, but also making certain that the revenue collected encourages development without stiffling the country’s economic growth. 

The Law Society of Kenya (LSK) President Mr. Eric Theuri told the legislators that the society was opposed to the National Housing Development Fund. He faulted the government for imposing a mandatory contribution that reduces the earnings of hardworking Kenyans while breaching the provisions of Article 201 of the Constitution. He argued that a contribution should not voluntary and not imposed through the enactment of legislation.

Both LSK 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 per cent to allow growth in the sector.

Concerned by the high number of litigants heading to court to bar KRA from enforcement of payment of revenue owed to them by these firms, the lawmakers sought their views on how the Authority can keep to their targets and still encourage firms to meet their tax obligations. The legislators were told that KRA should embrace alternative dispute resolution mechanisms to avert the litigation processes.

Taking to the podium, WestMinister Consulting told the Committee that they were opposed to the proposal to move petroleum products to being taxable at the rate of 16 per cent. They argued that this increase would most likely impact adversely the already high cost of living. The Consulting Firm further observed that effecting the increment while exempting LPG from the ambit of VAT is retrogressive and will only further impoverished the less endowed members of the society while benefiting their more than endowed counterparts.

They also called on the Committee to consider exempting organizations that run school feeding programs from value added tax so as to reduce the cashflow burden placed on such bodies that mostly rely on donations and other forms of contributions to fund their activities.

The Consulting firm further expressed their reservations on the suggestion in the Bill to impose a levy of 10 per cent on all goods imported into the country for home use at the customs value.

They argued that this proposal would have far-reaching implications on the manufacturing sector especially on the items the levy is being imposed on such as steel products, cement clinkers and paper products. They also observed that the levy goes against the protocol that created the East African Customs Union. The Firm noted that there are better methods of protecting local industries against unfair trade practices if that was the intention of this levy.

Machakos County

Monday, May 21, 2023

The submissions continue tomorrow.