Debate on the Finance Bill (2023) commenced this morning as the Bill entered the Second Reading Stage in the House. 

Moving debate on the Bill, the Chairperson of the Departmental Committee on Finance and National Planning Hon. Kuria Kimani (Molo) told the House that the Committee had carried out comprehensive public participation and stakeholder engagement, adding that the Committee would be introducing some amendments derived from the submission received.

He lauded the Committee Members and Members of the Secretariat for putting in long hours towards the preparation of the Committee’s Report on the Bill which laid on the Tabled on Tuesday.

Hon. Kuria however expressed concerns over the falsehoods that have peddled on some of the proposed revenue raising measures in the Bill and sought to debunk a number of them on the floor of the House. 

He underscored the need for the country to reassess its tax policies and explore more effective measures to enhance revenue collection. 

“Mr. Speaker, in comparison to other comparable African countries’ Tax revenue as a percentage of Gross Domestic Product (GDP) like Botswana’s 24 percent, Mauritius’ 18 percent and Zambia’s 17 percent, Kenya is falling behind in terms of tax revenue collection at 13 percent as at 2021. These countries have managed to achieve higher tax revenue collection rates. This disparity highlights the need for us to reassess our tax policies and explore more effective measures to enhance revenue collection”, Hon. Kuria told the House.

The Chairperson added that following public hearings and stakeholder engagement, the Committee would be introducing amendments to factor in some of the concerns raised, as well as enhance revenue collection which the Committee felt some provisions would stand in the way of.

For instance, Hon. Kuria explained to the House that transfer of business as a going concern was initially classified as exempt. However, the proposal to maintain this exemption was rejected by the Committee . The rationale behind the rejection was that exempting this item would imply that businesses are not required to pay taxes solely based on their exemption status, resulting in a loss of revenue for the Government.

He also told the House that the Committee in recognition of the importance of encouraging more young people to pursue self-employment subsequently reduced the rate of digital content monetization from 15 percent to three percent. 

With regard to the proposed deductions into the National Housing Development Fund, the Committee proposed to make it a levy as opposed to a mandatory contribution. Further, the Committee proposed that the rate be reduced from the 3 percent to 1.5 percent. 

Seconding the Motion, the Committee Vice Chairperson Hon. Benjamin Langat (Ainamoi) highlighted the importance of the Bill in spurring the economy and in helping address the runaway public debt, high cost of living and high rate of unempoyment. Likening the current economic status of the country to a company approaching insolvency, Hon. Langat told the House that Kenya has no choice but to raise revenue to become self reliant.

"Kenya has two choices; to either close down or inject more capital from the shareholders. Kenyans are the shareholders and they have to endure some little pain as we seek to enhance our revenue collection to meet our national obligations and address the competing national priorities", he told the House.

The Bill has 84 clauses and seeks to amend the following laws: the Income Tax Act (Cap. 470); the Value Added Tax Act (No. 35 of 2013); the Tax Appeals Tribunal Act (No. 40 of 2013); the Excise Duty Act (No. 23 of 2015); the Tax Procedures Act (No. 29 of 2015); the Miscellaneous Fees and LeviesAct (No. 29 ot 2016); the Unclaimed Financial Assets Act (No. 40 of 2011); the Statutory Instruments Act (No. 23 of2013); the Betting, Gaming and Lotteries Act (Cap, 131), the Kenya Roads Board Act, 1999,the Kenya Revenue Authority Act, 1995, the Employment Act, 2007 and the Retirement Benefits (Deputy President and Designated State Officers) Act (No. 8 of2015)

The amendments proposed to the above laws provide a raft of tax policy measures which aim at yielding additional revenue of KShs. 211 billion for the Fiscal Year 2023/24 which is part ofthe KShs. 2.571 trillion projected revenues for the said year.

It further presents an opportunity for the Government to accelerate implementation of key projects under the Bottom-Up Economic Transformation Agenda (BETA) through rationalized tax policies and fiscal consolidation framework through amendment of statutes that will help fast track the realization of this medium-term agenda (boost manufacturing activities, enhance food security, achieve Universal Healthcare and support construction of at least 50,000 affordable Houses) which are fundamental to improving livelihoods of the public.

Debate on the Bill continues.