The Finance Bill 2024 introduces changes that will impact the lives of Kenyans. These changes cover taxation on goods, services, and income, affecting household budgets, business operations, and the broader economy. Here’s a closer look at some key provisions and their implications for the common mwananchi.
Changes in Value Added Tax (VAT)
The Finance Bill 2024 proposes adjustments to VAT rates on many goods and services. These include an increase in VAT on processed foodstuffs, electronics, and household items. Products that were previously zero-rated or exempt will now attract VAT, raising their retail prices. This change will likely strain household budgets as the cost of basic goods rises.
For many families, this means higher grocery bills and increased costs for everyday items such as cooking oil, bread, and other staples. The overall effect is a potential decrease in disposable income, leading to reduced savings and spending power.
Taxation of Digital Content Creators
Digital content creators, earning through platforms like YouTube, TikTok, and Instagram, now face a new tax regime. The income from digital content creation will be taxed at 20%. This means individuals in this growing sector will see a significant portion of their earnings go to taxes.
This move aims to bring the digital economy into the tax net and increase government revenue. However, it could discourage new entrants into the digital space and reduce the income for existing content creators. This tax highlights the recognition of digital content creation as a viable economic activity.
Introduction of Affordable Housing Levy
To fund affordable housing projects, the bill introduces a levy of 1.5% on gross monthly earnings for all employees. This levy is mandatory and will be deducted directly from salaries.
For the average worker, this means a reduction in net income. For example, an employee earning Ksh. 50,000 per month will contribute Ksh. 750 towards the housing levy. While the goal is to address housing shortages and provide affordable housing, the immediate impact is less take-home pay, affecting other financial obligations.
Higher Excise Duty on Betting and Gaming
The bill increases the excise duty on betting, gaming, and lotteries to 12.5% of the amount wagered. This change will impact individuals who participate in these activities, as the higher tax rate increases the cost of betting and gaming.
This could lead to a decline in betting and gaming activities, as participants may find the higher costs prohibitive. However, it also aims to reduce the potential negative social impacts of gambling by making it less financially attractive.
Motor Vehicle Taxation
A new motor vehicle tax will be payable at the time of insurance cover issuance. The tax is based on the value of the vehicle, with specific minimum and maximum amounts set.
For vehicle owners, this tax means an additional financial burden when insuring their vehicles. It will affect both personal and commercial vehicle owners, increasing the overall cost of vehicle ownership. This could lead to higher prices for goods and services that rely on vehicle transport.
Increased Import Declaration Fee
The import declaration fee is raised to 2.5% of the customs value of goods. This change will result in higher prices for imported goods, affecting consumers who rely on these products.
Businesses that import raw materials or finished goods will face increased costs, which may be passed on to consumers as higher retail prices. This can affect the affordability of various products, from electronics to clothing, making them more expensive for the common mwananchi.
Tax Compliance for Remote Workers
Kenyan employees working remotely for foreign employers now need to register and comply with local tax regulations. This means remote workers will pay taxes on their earnings as if they were working for local employers.
This measure ensures all income earned by residents, regardless of the source, is taxed. While it boosts tax revenue, it may add an administrative burden for remote workers and potentially result in higher overall tax obligations.
Innovative Accountability Measures
Kenyans have come up with innovative ways to keep their members of Parliament accountable. They have shared MPs’ phone numbers on X platform and have developed a tool known as Finance Bill GPT, a GPT with upto date info on the finance bill, use it to understand the bill and ask any questions you may have. to inform the public about the bill. This grassroots effort demonstrates the citizens’ commitment to transparency and civic engagement.
In Summary;
The Finance Bill 2024 presents changes that will significantly impact the daily lives of Kenyans. From higher taxes on goods and services to new levies on income and digital content, the bill aims to broaden the tax base and increase government revenue. However, these measures also bring additional financial burdens to households and businesses. Understanding these changes is crucial for individuals to plan accordingly and mitigate the impact on their financial well-being.
Knowing the full scope of these changes is essential for Kenyans to navigate the evolving economic landscape and make informed decisions about their finances. As the bill comes into effect, staying informed and seeking financial advice will be key to managing the new financial realities.