Uhuru's Tax Cut Promise Missing in Tax Amendment Bill

  • President Uhuru Kenyatta addressing the nation regarding new measures by the government
    President Uhuru Kenyatta addressing the nation regarding new measures by the government to combat the Covid-19 virus, on March 25 at Statehouse, Nairobi.
    PSCU
  • The resident corporation tax rate reduction from 30% to 25% that Uhuru mentioned in his speech on March 25, as part of fiscal measures undertaken to combat the harsh economic effects of Covid-19 is not captured in the actual tax amendment bill.

    The proposed bill, seen by Kenyans.co.ke, included everything else he mentioned in his address but the omission of the resident corporation tax eduction has raised eyebrows, leading to closer scrutiny of the bill in question.

    A breakdown of the proposed Bill carried out by BDO Global (the world's fifth-largest accounting and advisory network), stated that the glaring omission would have to be addressed once the Bill is tabled in the House.

    President Uhuru Kenyatta at State House, Nairobi, where he hosted national prayers against the Coronavirus pandemic on March 21, 2020.
    President Uhuru Kenyatta at State House, Nairobi, where he hosted national prayers against the Coronavirus pandemic on March 21, 2020.
    PSCU

    Despite being pushed as a means to cushion the country against the expected negative effects on the economy following the Coronavirus pandemic, the bill's proposals are wholesome and are set to affect Kenyans long after the outbreak has been contained.

    For example, under the proposed changes, a total of 49 items would be declassified as exempt from VAT and moved into the VATABLE category where a 14% charge will be attached.

    Some of these items that will be taxable if the bill is taxed in its current state are: Entry fees into national parks, maize, fertilisers, mosquito nets, cooking stoves, agricultural pest control products, made-up fishing nets of man-made textile material, plant machinery and equipment used in the construction of plastics recycling plant among others.

    On the other hand, only 3 items were listed as having being moved from zero rate status to completely exempted namely: Milk & cream, ordinary bread, vaccines for human medicine, veterinary medicine, and specific medicaments.

    Law Society of Kenya (LSK) President Nelson Havi, has since written to the Clerk of the National Assembly Michael Sialai regarding the contents of the proposed bill, going on to highlight various shortcomings.

    "It was expected that the bill would only cover the implementation of these changes (President Uhuru's proposed tax changes), Our review of the Bill, however, reveals otherwise,

    We note there is the introduction of significant and far-reaching measures which will impact the public negatively," Havi's letter reads in part.

    The bill was set to be discussed in the House on April 8, but the sitting was cancelled on short notice.

    During his address on March 25, President Uhuru intimated that the measures would take effect on April 1, implying that Treasury and parliament would have had to move quickly to effect the tax proposals.

    However, the legislators are yet to convene, and according to a Gazette Notice drawn up by the Speaker of the National Assembly Justin Muturi, the next sitting is slated to take place on April 14.

    Below are screenshots of the items that are set to be VATABLE if the bill is passed in its current state:

    BDO Kenya Tax Amendment Bill 2020 Analogy