Businesses whose prices are regulated by the government are reportedly exempt from minimum taxes scheduled for January 1, 2021. Finance and National Planning Committee Chair Gladys Wanga says amendments on Tax Laws (Amendment) (No 2) Bill, 2020 are underway to exempt businesses regulated by the government from paying the new tax.
“We have proposed an amendment to exempt those whose business are already regulated by the government like the petroleum and insurance sectors,” said the chair.
Business Daily reports that the committee’s lobby efforts and the amendment will benefit insurers and Oil Marketing Companies.
Petroleum Institute of East Africa (PIEA), a petroleum lobby, says that the minimum tax will trim the predetermined single-digit margins making the business unsustainable.
Prices of petroleum products are predetermined by the Energy and Petroleum Regulatory Authority (EPRA). As a result, businesses in the segment do not control their margins from a price point of view.
“It will be punitive for the same turnover to be subjected to additional taxes. OMCs that participate in the Open Tender System have very low margins ranging from 0.5 percent to 0.8 percent. Imposing minimum tax will cause importers of petroleum products to withdraw from the OTS,” says the lobby.
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New Year Taxes Besides Minimum Tax
The 1% minimum tax on gross turnover is among other tax initiatives effective on January 1, 2021, geared at widening the tax base. KRA will require businesses to pay the tax since they enjoy facilities serviced by the state whether or not they are profitable.
After the new year, other taxes that will take effect include the 1.5% digital tax, residential income tax changes, and the Import Declaration Fee. The Import Declaration Fee charges a 1.5% tax on customs value under the EAC Duty Remission Scheme a 1.5%. It also lifts exemptions for goods worth over Ksh 200 million once exempted on public interest grounds.
Read More On: KRA Invites Comments On 1.5% Digital Tax.
