President Uhuru Kenyatta signs the Division of Revenue Bill, 2021 into law at State House, Nairobi, on April 30, 2021. PHOTO | PSCU
Summary
- Analysts had expected the President to object to the new taxes or revised duty that were not in the government-backed Finance Bill, 2021 tabled in Parliament on April 30.
- MPs increased excise duty on airtime and data from 15 percent to 20 percent, which will see the Treasury raise at least Sh8 billion from Safaricom, Airtel and Telkom Kenya.
President Uhuru Kenyatta has assented to the Bill introducing new taxes on airtime and betting, allowing the Kenya Revenue Authority (KRA) to start collecting the duties from yesterday.
Analysts had expected the President to object to the new taxes or revised duty that were not in the government-backed Finance Bill, 2021 tabled in Parliament on April 30.
MPs increased excise duty on airtime and data from 15 percent to 20 percent, which will see the Treasury raise at least Sh8 billion from Safaricom, Airtel and Telkom Kenya.
Parliament rejected the Treasury’s proposal to change the way tax on bread is calculated in a shift that would have seen bakers stopped from seeking refunds from raw materials such as electricity. This could have led to an increase in bread prices and pushed it out of reach of a majority of households that are grappling with Covid-19 economic hardships.
Parliament agreed to cut the 20 percent tax on winnings from gambling to 7.5 percent, a boost to gamblers and blow to the Treasury. The MPs also lowered the Treasury’s proposal to reintroduce excise duty on betting stakes to 7.5 percent from 20 percent that the State had published at end of April through the Finance Bill, 2021.
The Treasury had sought to reintroduce the 20 percent tax on betting stakes through the Finance Bill 2021, as it eyed billions of shillings from punters annually.
The 20 percent tax on betting stakes was introduced in 2019 but Parliament removed it last year through amendments to the Finance Act, 2020 following lobbying by betting firms. Punters currently pay 20 percent on their winnings but the parliamentary committee reduced it to 7.5 percent, saying the current taxation regime for betting is too high and has put off investors. Mr Kenyatta’s approval of the Finance Act before July 1 is a boost to the KRA that has in the past grappled with months of delay or rejection of the Bill. The President has powers to back or reject the new taxes that MPs introduce in the government-backed Finance Bill. He, for instance, rejected the Finance Bill in 2018 and 2019, leading to delays in imposing new taxes and other regulations.
Nikhil Hira, director at law firm Bowmans, said that assenting to the Bill before July 1 has helped the Treasury avoid similar impasse that in the past led to revenue losses.
“In 2018 and 2019, there was a big delay and the President refused to sign it till sometime after October. The sole purpose was to get every tax measure in the Bill to be in place by July 1,” said Mr Hira. “If he had rejected for example the excise on loans processing, then it would take at least three weeks to pass. You can imagine how much revenue would have been lost from loans processing if he had rejected it.”
The 20 percent excise duty on loan fees will see banks pay the taxman more than Sh7 billion annually, which risks making credit costly for homes and businesses as lenders transfer the burden to borrowers.
Safaricom on Tuesday warned that it would increase airtime and Internet charges if the President backed the MPs’ proposal to raise excise duty by five percentage points.
“This being a consumption tax, the burden, unfortunately, has to be absorbed by customers,” Peter Ndegwa, the Safaricom CEO, said.
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