Kenyans will have the opportunity to share their views on two key tax bills proposed by the National Treasury as public hearings kick off on Monday.
The focus will primarily be on the Tax Laws Amendment Bill 2024, which aims to generate over Ksh. 178 billion in additional revenue for the 2024/2025 budget.
The Treasury is banking on this bill to bridge the budget deficit created by the withdrawal of the Finance Bill 2024 and to fund critical development projects across the country.
The proposed tax adjustments, whose public participation process begins in Isiolo, seek to revise all major tax categories, including excise duty, income tax, and value-added tax (VAT).
Among the notable changes is the introduction of the Significant Economic Presence Tax, replacing the Digital Service Tax.
This new tax targets non-resident individuals and businesses earning income in Kenya, applying a 6% tax rate on foreign earnings.
Businesses operating in the digital marketplace, such as ride-hailing apps, will also be impacted, with a proposed 10% levy on their gross turnover classified as taxable profit.
Other proposed measures include a 16% VAT on air tickets purchased through travel agents, which are currently exempt.
Entry fees for national parks and reserves, along with tour operator services, will also attract a 16% VAT if the proposals become law.
At the same time, to support agriculture, the Treasury plans to exempt pest control products, fertilizers, and raw materials used in their production from VAT, aiming to reduce manufacturing costs and promote affordability in the market.
To alleviate financial pressure on employees, the Treasury has proposed that contributions to the Housing Levy and Social Health Insurance Fund (SHIF) be treated as allowable deductions.
This adjustment means income tax will apply only after these deductions are made. For instance, an employee earning a gross salary of Ksh. 50,000 will now be taxed on Ksh. 45,715 instead of Ksh. 47,840, resulting in a savings of Ksh. 525 under the new system.
By Fred Azelwa.