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CS prescribes tax measures to ‘midwife’ the Big Four plan

Fred Aminga @faminga

Treasury Cabinet Secretary Henry Rotich yesterday elaborated on measures he intends to take to fund the Sh3.074 trillion 2018/19 budget.

Banking on the government’s Big Four Agenda to spur growth by boosting manufacturing activities, enhancing food and nutrition security, achieving universal health coverage and supporting the construction of at least 500,000 affordable houses by 2022.

In his Budget statement, Rotich moved to have the Employment Act amended to make employers contribute to a National Housing Development Fund 0.5 per cent of the gross monthly pay, while the employee contributes 0.5 per cent of their monthly gross earnings subject to a maximum of Sh5,000.

He then targeted taxpayer’s pockets by introducing a ‘Robin Hood Tax’ of 0.05 per cent on any amounts of Sh500,000 or more transferred through banks and other financial institutions.

Rotich also made the cost of mobile money transfers more expensive by increasing excise duty charged by cellular phone service providers from 10 per cent to 12 per cent.

Kabondo Kasipul MP Eve Akinyi (left) and Controller of Budget Agnes Odhiambo yesterday. Photo/GERALD ITHANA

Last year, Kenyans transacted Sh3.4 trillion through mobile phones, this means Sh340 billion was channelled to the Exchequer.

He said these measures are supposed to raise funds to be used to fund Universal Health care as part of tax proposals through the 2018 Finance Bill designed to generate an additional Sh27.5 billion in tax revenue, adding that proposed tax measures are intended to incentivise the achievement of the Big Four and offer strategic incentives.

Rotich increased the cost of kerosene after hiking the excise duty rate of Sh7,205 per 1,000 litres to match gas oil, which is subject to Sh10,305 duty per 1,000 litres.

This will hike the cost of living for Kenyans who currently use kerosene, coming at a time firewood is hard to come by due to a ban on logging.

The proposal targets unscrupulous dealers who use the cheaper Kerosene to adulterate more expensive fuel products, resulting in loss of excise duty revenue to the Exchequer.

The cost of private passenger motor vehicles, whose engine capacity exceeds 2500cc for diesel and 3000cc for petrol powered, also increased after excise duty was hiked from 20 per cent to 30 per cent.

The cost of paper could also go up sharply in what could hit consumers hard after Rotich increased the rate of import duty from 25 per cent to 35 per cent to protect manufacturers of these products.

“I have increased the rate of import duty from 25 per cent to 35 per cent on some paper and paper board produced in the region,” he said.

But PFK Michael Mburugu, a partner at consulting firm PKF says that with depleted forest and the increasing demand for timber, it means Kenya doesn’t have enough trees to even produce paper locally meaning most will have to be imported.

He also said that import duty on steel and iron could also increase the cost of steel since Kenya imports most of these goods from China.

“Our iron and steel industry is facing stiff competition from imported cheap and subsidised iron and steel products. In order to protect the local iron and steel industries, I have increased the rate of import duty from 25 per cent to 35 per cent in a wide range of steel and iron products which are available in the region,” Rotich said.

The CS said the government will target investors that are ready to invest in specific areas by providing tailor-made incentives.

“To facilitate investment by targeted investors, the government will provide special fiscal incentives through a special operating framework arrangement that outlines the specific conditions and deliverables that are measurable and with specific timeliness that must be met,” he said.

Rotich proposed a framework to introduce special incentives in the VAT Act, Excise Duty Act, and Miscellaneous Fees and Levies Act, and provide a preferential tax rate under the Income Tax Act in order to encourage investments.

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