Government Proposes 47 Amendments to Collect Ksh.150 Billion in New Taxes Amidst Fiscal Deficit

The Kenyan government has proposed 47 amendments to raise Ksh.150 billion in new taxes. These amendments come in response to the withdrawal of the controversial Finance Bill 2024, which had been met with widespread protests, particularly led by Generation Z activists. The new revenue-raising measures are part of the Tax Amendment Bill, which is currently being processed for introduction to Parliament.

Reintroduction of the Eco-Levy Tax

One of the most contentious clauses making a comeback is the eco-levy tax, a proposal that had previously sparked street protests and significant opposition from multinational corporations. Treasury Cabinet Secretary (CS) John Mbadi, confirmed the government’s intention to reintroduce the eco-levy, albeit with some modifications. “We have lined up 47 amendments among them the eco-levy. We will however remove the ban on sanitary pads and other sensitive items,” Mbadi said.

The eco-levy had previously faced stiff resistance, notably from global beverage giant Coca-Cola, which opposed the 10% excise duty included in the earlier proposal. The government’s decision to reintroduce this tax suggests a determination to tap into new revenue streams, even in the face of public and corporate pushback.

Tax Amnesty and Extension of Filing Deadlines

In addition to the eco-levy, the government is also extending the tax amnesty period by six months. This extension is designed to encourage more Kenyans to file their returns, with the hope that the extended deadline will result in increased compliance. “Some people have been avoiding paying taxes because of the deadlines. We hope that we will have more people paying,” CS Mbadi noted.

This move is likely a response to the challenges faced by the Kenya Revenue Authority (KRA) in meeting revenue targets. By providing additional time for taxpayers to comply, the government aims to reduce the number of defaulters and enhance overall tax collection.

Tax-Exemption of Basic Commodities

In a bid to alleviate the financial burden on ordinary Kenyans, the government plans to tax-exempt certain basic commodities, including bread. This measure is expected to save an additional Ksh.70 billion. “We have been paying Ksh.525 billion in tax refunds and some are fictitious… By tax-exempting bread, we will maintain the same but reduce government expenditure,” Mbadi explained.

The decision to exempt bread from taxation reflects the government’s awareness of the need to balance revenue generation with social welfare. Bread, being a staple food item, is consumed by a majority of Kenyans, and its tax-exemption is likely to provide much-needed relief to households struggling with the rising cost of living.

Strengthening KRA’s Systems and Sealing Loopholes

To further bolster revenue collection, the government has announced a series of changes at the KRA aimed at sealing loopholes and improving efficiency. These changes are expected to bring in an additional Ksh.105 billion. CS Mbadi highlighted the importance of automation in this process, stating, “We will seal all loopholes through automation of systems.”

Automation is seen as a critical step in reducing tax evasion and enhancing transparency within the KRA. By modernizing its operations, the government hopes to close revenue gaps and ensure that all taxable income is accounted for.

Racing Against Time

With a looming deadline of September 30, the government is under pressure to implement these tax measures swiftly. President William Ruto has already announced a Ksh.177 billion spending cut and Ksh.169 billion in additional borrowing to cover the shortfalls resulting from the Finance Bill 2024’s withdrawal.

The new tax measures are also intended to address pressing needs, such as paying teachers who have threatened to strike, funding security forces, and supporting university funding. The success of these amendments will be crucial in determining the government’s ability to meet its financial obligations and maintain economic stability.

In conclusion, the government’s proposed amendments represent a bold attempt to address the fiscal challenges facing the country. While the reintroduction of the eco-levy and other tax measures may face opposition, the government’s focus on enhancing revenue collection and reducing expenditure is a clear signal of its commitment to fiscal responsibility. As the September 30 deadline approaches, all eyes will be on Parliament and the KRA to see if these measures can be implemented effectively and without further public unrest.