Inside Ruto’s New Taxes for Schools, Car Owners, and Alcohol Consumers
Despite the public outcry following the implementation of the Finance Act of 2023, which introduced additional taxation measures on an already heavily taxed population, it seems that the government is continuing to burden Kenyan citizens with more financial demands to fund its development initiatives.
The medium-term revenue strategy for the fiscal years 2024–2025 and 2026–2027 is undergoing public participation, and Kenyans have until October 6 to submit their feedback.
To ensure a consistent tax framework, the revenue plan proposes to review the VAT rate and align it with that of other EAC member states, which is 18 percent; if implemented, this will increase the price of all manufactured goods, including consumer products.
Further proposals include the elimination of VAT exemptions and the zero-rating of products, as well as the reintroduction of a minimum tax regime to discourage tax evasion by under-declaration by corporations and other entities.
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Proposed VAT on School Services
The government has proposed the introduction of value-added tax (VAT) on services provided by institutions that are not directly related to education; this could include swimming and other non-educational activities.
This is despite the fact that the Competency-Based Curriculum (CBC) encourages students to participate in more extracurricular activities.
In an effort to further squeeze salaried Kenyans, the National Treasury is also attempting to eradicate personal reliefs resulting from insurance and medical coverage.
Car owners will face additional charges on top of the various taxes they already pay, including the fuel levy, insurance premiums, and road levy.
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The new tax plan aims to introduce an annual motor vehicle circulation tax, which individuals will pay when purchasing insurance. The tax amount will be calculated based on the engine size of the vehicle.
And as the government moves to align its actions to also aid in the mitigation effects of climate change, the National Treasury has proposed an increase in excise taxes on vehicles that use fossil fuels, including tractors, forklifts, and excavators, among others.
The excise tax on hydrocarbon products will undergo a review, and a similar tax will be applied to coal.
The exchequer seeks to impose a tax of no more than five percent on agricultural products, despite the government’s drive to have farmers increase their activities in order to promote food security.
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And in what the government claims is an effort to discourage the consumption of alcoholic, tobacco, and sugar-sweetened non-alcoholic beverages, which pose a significant health risk, the National Treasury has proposed increasing excise duty on the commodities, a move that will likely cause prices to skyrocket.
Alcohol consumers will pay tariffs proportional to the amount of alcohol in the drinks they consume.
Prof. Njuguna Ndung’u, Cabinet Secretary of the National Treasury, argues that the strategy will help the country raise the funds necessary for the implementation of the Bottom Up Economic Transformation Agenda (BETA) and align Kenya’s revenue yield with the East African target of 25 percent of the GDP.
Prof. Ndung’u predicts that after implementation, the country’s ordinary revenue will increase to 5% from the current 14% of GDP.
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Even as Kenyans submit memoranda on the proposals, analysts anticipate that the plan will spark acrimonious debate due to the ongoing economic challenges caused by the COVID-19 shock, leading to daily wage reductions.
Inside Ruto’s New Taxes for Schools, Car Owners, and Alcohol Consumers
