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Treasury defends taxation measures in Uhuru memo

James Momanyi @jamomanyi

The government intends to raise about Sh30 billion from betting, lotteries and gaming if Parliament today approves President Uhuru Kenyatta’s proposals to the Finance Bill 2018.

Treasury Cabinet secretary Henry Rotich yesterday put up a spirited defence on the raft of proposals before the National Assembly Finance Committee members who were reviewing the tax proposals recommended by the President in his memorandum to Parliament.

Rotich says the memorandum proposes to amend the Income Tax to reduce taxation of betting, gaming, lotteries and prize competition from the current 35 per cent to 15 per cent but introduce new taxation on winnings, at 20 per cent.

The CS said the aim was to enhance equity and fairness because the industry has been complaining of over-taxation.

“The introduction of 20 per cent tax on winnings on betting, lotteries, prize competition, and gaming and the reduction of 35 per cent taxation to 15 per cent will enable KRA collect between Sh24 and 30 billion a year from the current Sh8.7 billion. This is besides the corporation tax these companies pay and contribution to the ‘good cause’ fund for sports and universal health,” said Rotich.

The government is also expected to get a windfall from excise duty on fees charged for money transfer services by cellular phone service providers and banks.

The President’s memorandum insisted on the retention of excise duty on mobile money transfer from 10 per cent to 12 per as approved by Parliament in the Finance Bill 2018.

It also reintroduced excise duty on telephone and internet data services which had been deleted by Parliament in the Finance Bill and increased the tax from 10 per cent to 15 per cent. This will earn the government Sh7.8 billion.

The President also returned the excise duty on fees charged for money transfers services by banks and other financial service providers from the current 10 per cent to 20 per cent. This will also include excise duty on other fees charged by financial institutions. This increase will earn the tax collector a further Sh11.4 billion from the initial Sh7.6 billion.

However, as a reprieve, and because of the increase in excise tax from 10 per cent to 20 per cent, the President removed the initial ‘Robin Hood’ tax on bank transfers of more than Sh500,000.

“This way, we expanded the excise duty to cover all the wireless telephony and fixed accounts to get more money to compensate for scrapping the ‘Robin Hood’ tax and bring more people to the tax base,” Rotich explained.

The President also reintroduced tax on employee and employer contribution to the housing contributory scheme that had been removed by Parliament in the Employment Act.

In the proposal, a employer will pay to the National Housing Development Fund five per cent of the employee’s monthly basic salary while the employee will pay 1.5 per cent of his/her monthly basic salary, but the employer and employee contribution shall not exceed Sh5,000 monthly.

The employee who qualifies for affordable housing can use the accrued money to purchase an affordable house under the government scheme. Those not eligible upon expiry of 15 years from the date of making the contributions or after the attainment of retirement age can transfer their contributions to a pension scheme or to any person registered and is eligible for affordable housing. They can also transfer to their spouse or dependent children or receive their contribution in cash.

The CS said regulations for the fund will be ready soon and that the government expects to raise about Sh10 billion a year to the fund from the country’s wage bill of Sh600 billion.

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