Govt Drops Major Tax Proposals Amid Protests

The Kenya Kwanza Government has withdrawn significant tax proposals that have recently sparked widespread public outcry among Kenyans.

The announcement followed a parliamentary group meeting hosted by President William Ruto at State House, Nairobi, on Tuesday.

In a press briefing after the meeting, the Ruto team stated that the proposals were withdrawn after a public participation exercise revealed significant opposition from Kenyans.

The dropped proposals include taxes on bread, motor vehicles, and eco tax.

According to the Finance and National Planning Committee chair Kuria Kimani, eco tax will only apply to imported finished products.

“The exercise we did on public participation was not an exercise in futility. We have agreed that we must protect Kenyans from increased cost of living,” said Kuria.

Excise duty on vegetable oil has also been removed.

The tax on mobile service transfers has been retained at the existing 15 percent rate.

The tax on locally manufactured diapers and sanitary pads has also been dropped.

“It is crucial to point out that the Eco Levy is being levied on imported finished products. Locally manufactured products will, therefore, not attract the Eco Levy. Local assembly and manufacturing will help boost Kenya’s manufacturing capacity, create jobs, and save foreign exchange,” Kuria said.

The threshold for VAT registration has been increased from Sh5 million to Sh8 million, meaning many small businesses will no longer need to register for VAT.

“Responsibility for electronic invoicing (eTIMS), recently introduced by KRA, has been removed from farmers and small businesses with a turnover below Sh1 million,” Kuria said.

He also noted concerns raised about avocado farmers being asked to issue eTIMS receipts. “We have proposed that farmers and businesses with an annual turnover of less than Sh1 million be exempted from eTIMS registration,” Kuria said.

eTIMS stands for electronic Tax Invoice Management System, a software solution developed for tax invoicing.

Excise duty has, however, been imposed on imported table eggs, onions, and potatoes to protect local farmers.

Excise duty on alcoholic beverages will now be based on alcohol content rather than volume. The higher the alcohol content, the more excise duty it will attract. Consequently, alcohol manufacturers are expected to produce safer and cheaper alcohol.

The exemption for pension contributions will increase from Sh20,000 per month to Sh30,000.