Deloitte Kenya: Finance Bill 2024 Harmful for Kenyans

May 22, 2024

Deloitte Kenya has joined a growing list of opponents to the proposed Finance Bill 2024, stating it burdens Kenyans and hinders economic growth.

In a Tuesday morning webinar by Deloitte Kenya, speakers highlighted the bill’s negative economic and fiscal impacts, particularly given the current high tax burden on citizens.

Fredrick Omondi, Deloitte East Africa Tax and Legal Leader, expressed concerns that the increased tax burden will reduce purchasing power and raise business costs, harming both citizens and the economy.

He criticized the frequent tax policy changes for creating business risks and compliance costs. Omondi emphasized that while increasing tax revenue as a percentage of GDP is crucial, it should be achieved by enhancing compliance and economic growth, not by overburdening taxpayers.

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“The frequent changes in tax policy also create more risks for businesses and make it costlier for taxpayers to comply and does not augur well for our country. Whereas the drive to grow tax revenue as a percentage of GDP is understandable, the means of achieving this should not be through overburdening existing taxpayers and businesses with additional taxes, but rather greater focus on enhancing compliance and growing the economy to improve incomes and thereby generate higher taxes,” Omondi observed.

Omondi further suggested reevaluating measures from the Finance Act 2023, which have introduced significant challenges. Key issues include the imposition of e-TIMs for expense deductibility, removal of penalty waivers, frequent withholding tax remittance, new tax burdens on employees through the Affordable Housing Levy, Social Hospital Insurance Fund, and increased NSSF contributions.

Deloitte East Africa Financial Advisory Leader Gladys Makumi noted that while Kenya aims to reduce debt reliance, levies on essential household items, amid inflation and stagnant wages, would decrease private consumption.

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Peter Njenga, Deloitte East Africa Tax and Legal Senior Manager, mentioned that taxing alcoholic products based on pure alcohol content will lower excise duty on low-alcohol products like beer but raise it on high-alcohol products like spirits and wines. He also warned that the eco levy on office equipment, smartphones, and computers will reduce their affordability and increase business costs.

“The introduction of eco levy on various office equipment, smartphones and computers will reduce affordability of these commodities, increase the cost of doing business and negatively impact the welfare of the local mwananchi,” he said.

Deloitte East Africa Tax and Legal Partner Doris Gichuru discussed the introduction of Advance Pricing Agreements (APAs), which allow multinational enterprises to agree on transfer pricing mechanisms with the Kenya Revenue Authority (KRA). She stated that if well implemented, APAs could provide certainty and reduce tax disputes for multinational companies.

The Finance Bill 2024, published on May 9 and tabled before the National Assembly on May 13, proposes various amendments to tax and levy acts. The public has been invited to submit comments on the bill by May 28 before its potential approval and enactment in June.

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