The Finance Committee (National Assembly Finance and National Planning Committee) has rejected the tax imposition on bread, as well as the variation of excise duty on imported motorcycles, citing tough economic times. The Committee argues that an increase in the price of bread goes against the government’s Big Four agenda pillar on food security.
The proposal by National Treasury earlier sought to impose higher taxes on bread, motorcycles, betting, imported jewellery, and nicotine pouches to fund President Uhuru Kenyatta’s KSh3 trillion budget.
While Treasury proposed to move VAT on the supply of ordinary bread from zero to exempt, the Committee has argued that it will raise the cost of living on Mwananchi. A “zero-rated good,” means that the government doesn’t tax its sale but allows credits for the VAT paid on inputs. However, if a good or business is “exempt,” the government doesn’t tax the sale of the good, but producers cannot claim a credit for the VAT they pay on inputs to produce it.
In general, MPs want zero-rated taxes charged on the supply of maize flour, cassava flour, wheat and maize flour containing cassava flour.
At the same time, the Finance Committee has rejected the variation of excise duty for motorbike/bodaboda imports from a flat rate of KSh11,608.23 to a varied rate of 15%.
Moreover, the Finance Committee wants locally manufactured confectionery to remain exempt from excise duty while raising the effective rate of excise duty on imports from KSh20 per kilo to KSh35.
Additionally, the new proposal seeks to retain the following under exempt supply:
- Baby formula
- Clean cooking stoves
- Fishing supplies and plant
- Fish feeding and handling
- Items used in water operations, fish cages, cold storage, pond construction and fish processing.
Furthermore, materials and machinery used for the manufacture of such goods will also be under exempt status.
The Finance committee has further proposed that transportation of sugar cane to milling factories be zero-rated. To shield Kenyans from imports, MPs have proposed increasing the excise duty rate on imported sugar confectionery from KSh20 to KSh35.
Additionally, they have also sought to exclude the importation of glass bottles from East African community countries from the excise duty. The Committee also recommended that the proposed rate of excise on products containing nicotine be reduced from KSh5,000 per kg to KSh1,200 per kg.
Further, the Finance Committee wants transporters to be removed from the exempt list of taxable export services to retain the competitiveness of local logistic firms in the region.
MPs have, however, sought to increase the rate of excise duty from 15% to 20% on telephone and internet data services. Gamblers are also on the losing side after the Finance Committee proposed a hike to excise duty on waged amounts from the proposed rate of 20% to 30%. The Committee further wants gambling taxes imposed on all betting categories, including gaming, prized competitions and lotteries.
Another tax that was rejected was the Digital Services Tax (DST) which was to be imposed on digital services offered in Kenya. KRA was to invoice digital marketplaces for 1.5% of the gross transaction value.
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