The National Assembly Finance & Planning Committee has released its report on the Finance Bill 2024, highlighting significant changes and impacts across various sectors.
Here’s a breakdown of key developments:
Tax Adjustments and Impacts
The Committee eliminated the Motor Vehicle Tax but raised the Road Maintenance Levy by 39% to Kes 25.0 per liter. This adjustment will notably influence fuel prices, with super expected to climb to Kes 196.84 per liter, diesel to Kes 180.10 per liter, and kerosene to Kes 170.05 per liter.
Accelerated Tax Measures
Certain tax measures are set to take effect earlier, moving from September 1st, 2024, to August 1st, 2024. This acceleration means that the impact of excise duties will be felt sooner.
Manufacturers and consumers secured a victory with the retention of Sec14 of the Excise Duty Act, allowing excise duty offsets between inputs and outputs. However, importers face a setback as the Import Declaration Fee is slated to increase from 2.5% to 3.0%.
Uncertainty Around Tax Policies
The report presents conflicting signals regarding the Significant Economic Presence Tax, leaving its rate ambiguous.
Withholding taxes on infrastructure bonds and goods supplied to public entities will remain in effect. In a win for the financial sector, the proposed VAT on financial services was scrapped, although the excise duty on money transfers will persist at 15%.
Compliance and Penalties
The Committee recommended penalties for failure to integrate with eTIMS, yet specifics on these penalties remain unspecified.
Additionally, the VAT threshold is set to rise to Kes 8.0M in annual turnover, necessitating corresponding amendments. Meanwhile, the proposed Kes 2.0M/month penalty for non-compliance with eTIMS integration lacks clarity.
Environmental Levy and Trade Implications
The introduction of the Eco Levy on imported finished products raises concerns about its compatibility with existing trade agreements. The Finance & Planning Committee’s report on the Finance Bill 2024 presents a mix of tax reforms.
While some measures, such as retaining VAT zero-rating on bread and rescinding certain excise duties, are advantageous, the implementation of increased levies and taxes presents challenges. Businesses and individuals alike must stay informed and adapt swiftly to navigate the evolving tax landscape.