When President Uhuru Kenyatta signed into law the Finance Bill, 2019 on October 7, the Kenya Revenue Authority (KRA) received a boost in its quest to meet its revenue targets to finance the 2019/2020 budget.
The legislation introduced a number of tax provisions that did not attract as much coverage as the scrapping of the interest rate caps for commercial banks.
“Repeal of the Banking Act is expected to enhance access to credit by the private sector, especially the micro, small and medium enterprises (MSMEs), as well as cut out exploitative shylocks and other unregulated lenders,” a statement from State House had argued in defence of the controversial move.
Several other provisions introduced by the Act have a direct impact on the life of everyday Kenyans.
Betting tax
The betting industry was dealt the largest blow as the new law carried with it a 20% tax rate on the amounts won from stakes.
In June, the treasury had promised to reduce the tax imposed on bets to 10% as per section IV of the Excise Duty Regulations, however, a vote by members of Parliament sought to raise the tax in what they termed as an attempt to curb the vice of betting.
A fierce battle between the KRA, the betting regulator BCLB and betting firms saw two giant betting giants close shop in the country.
'Sin' tax
Under Part IV of the excise duty law, cigarettes and alcohol came second on the chopping board.
The two remained an easy target for the taxman based on the revision of the rates on cigarettes, wines and spirits.
In in the light of the new law, fruity wines will warrant Ksh. 189 from the previous Ksh. 157.80. Spirits that had alcohol content above 10 percent warranted a new excise rate of Ksh. 253 a litre from the previous Ksh. 210.40
Flour tax
The law recategorises supply of maize(corn) flour, cassava flour, wheat or meslin flour and maize flour containing cassava flour from 'zero-rated' to 'exempt'.
Based on the new law, millers were not in a position to recoup previously collectable value-added tax, a move that could significantly hike flour prices.
With a number of Kenyans living just about the poverty line, they are sure to be immensely stretched out.
'Digital' Tax
Under section 3 of the Income Tax Act, the Financial Act 2019, imposed taxes on income accrued through the digital marketplace.
Kenyans using the internet as a platform to do business or that made money directly from the internet will now be taxed in a move at ensuring equity in taxation.
'Small-time Hustles'
Under Section 10 of the Income Tax Act, security services, cleaning and fumigation services, catering services offered outside hotel premises, transportation of goods(excluding air transport services), sales promotion, and marketing and advertising services will be subjected to a 10% tax rate.
Penalties
The Kenya revenue authority was expected to raise tax collections to Ksh1.85 trillion by June 2020, equating to a 17.9 per cent GDP growth.
For compliance, the Act rationalized tax procedures providing equal sanctions on non-compliant taxpayers. A general penalty of Ksh2 million or imprisonment for a term not exceeding two years would be imposed on those who failed to comply with the law.
Nonetheless, the Tax Procedures Act brought forth a general and harmonised late re-payment penalty at the rate of five percent.
Companies
Companies operating a plastic recycling plant, a 15% rate is due for the first five years from the year of commencement of its operations.
For Kenyans operating recycling businesses, this comes as a crippling blow to their business as the law puts them on the taxman's radar despite the environmental protection dividend earned.
