Wednesday, June 12, 2024

Kenya: Revised Finance Bill Still to Hurt Kenyans' Pockets More

The government has moved to salvage the petroleum business sector at the expense of Kenyans by increasing the VAT on petroleum from 8 percent to 16 percent.

Kenyans will now be forced to adopt green energy or bear with the increased cost of living as the government maintained that the negative impact of retaining VAT at 8 percent outweighs the positives.

This is despite the public outcry by different stakeholders that the increased percentage of VAT on petroleum products will raise the cost of living.

“The government stands to lose as petroleum businesses become perpetual creditors which then impact quality of service delivery by the government to the citizenry,” said Finance Committee Chair Kimani Kuria.

“Dealers incur VAT at 16 percent but when they sell it it’s at 8 percent. This means there’s an 8 percent difference.

Given the increase in the VAT on petroleum products, Kuria said they have proposed incentives to sectors that offer alternatives to fuel consumption by zero-rating bio fuel energy, Liquefied Petroleum Gas(LPG), and clean cooking stoves.

“We have had interest conservation with players of clean energy which include Koko Fuel which are able to produce bio ethanol for cooking which was costing Sh 10 bob for a family to prepare a meal,” said the Molo MP.

The proposed VAT increase comes at a time when global oil prices have been soaring, exerting additional pressure on consumers’ wallets.

The implementation of a VAT hike will further burden businesses and individuals already struggling to recover from the shocks of a pandemic-induced economic downturn.

Mobile Money Transfer

It’s a reprieve for Kenyans as the proposal to increase tax on mobile money transfers from 12 percent to 15 percent has been shelved.

Instead, the committee has resorted to retaining it at 12 percent as telco operators had argued that the move would have drawn back efforts of financial inclusion for low-income earners through mobile money.

The additional costs will likely be passed on to customers, many of whom are unbanked and rely on the service for essential daily payments.

“We have reduced the raise of tax on mobile money transfer from 15 percent to 12 percent,” Kimani stated.

Digital Content Tax

The income earned through digital content monetization will be subjected to a 5 percent withholding tax, which matches with the percentage rate for other professional services.

The bill defines content creators as any individual that is offering “entertainment, social, literal, artistic, educational or any other material electronically,” through websites, and social media platforms like Facebook, Twitter, or Instagram, in partnership with brands or retailers.