The Finance Bill 2023 was finally tabled before the National Assembly last week. The Bill comes after a lot of speculation by taxpayers, lobbying by business associations, and speeches or promises from government officials.
Changes that taxpayers were expecting in the Bill include the exemption of liquefied petroleum gas (LPG) from value-added tax (VAT) and levies and fast-tracking of the tax refund process.
There are a couple of wins and losses for ordinary taxpayers if the Bill is enacted into law as it is.
Households who cook using LPG can look forward to a sharp decrease in the price of clean fuel if the proposal to exempt the commodity from 8.0 percent VAT, 3.5 percent import declaration fee and 2.0 percent railway development levy is effected.
Further, taxpayers who have huge tax debts will get a chance to get a waiver of any accruing penalties and interest if they declare principal tax that accrued up to December 31, 2022, and pay the principal tax by June 30, 2024.
This looks like a revival of the voluntary tax disclosure programme which is ending in December 2023.
Additionally, taxpayers that had declared and paid their principal tax liabilities for up to December 31, 2022, can rest easy as the Kenya Revenue Authority (KRA) will be required to refrain from collecting the interest and penalties from such taxpayers.
Separately, taxpayers can look forward to the reduced excise duty on telephone (airtime) and data services, which will go down to 15 percent from 20 percent.
The excise duty that is charged on money transfer services by banks is also set to be reduced from 20 percent to 15 percent.
In addition, taxpayers can expect reduced prices for medicines because the government intends to give a variety of tax incentives to encourage local manufacturing of medicines.
This is, however, expected to be in the long term because the incentives, some of which began in 2022, are fairly new.
Finally, taxpayers can look forward to a faster refund of overpaid taxes if the proposal to reduce the time taken to refund an already ascertained tax refund, from two years to six months, is implemented.
The proposal is also sweetened by providing a specific time of 120 days for the KRA to carry out and finalise an audit for purposes of ascertaining the refund due to a taxpayer. Previously there was no time limit for the KRA audit.
Among the losses that ordinary taxpayers may have to contend with if the Bill becomes an Act are the following: VAT on petroleum will increase from 8.0 percent to 16 percent, meaning the price of fuel at the pump will increase.
This not only affects motorists but also ordinary Kenyans who use kerosene to cook or light their homes.
Ordinary taxpayers will also be affected by the introduction of the mandatory contribution to the National Housing Development Fund.
The contribution, which is made from a deduction from the employee's salary, will further reduce their disposable income.
The promise to own a house in later years may not be sufficient when the taxpayers are struggling to meet their current daily needs. The contribution should be made optional.
Further to the above, taxpayers who wish to appeal against a decision of the Tax Appeals Tribunal will be required to deposit 20 percent of the amount in dispute with the KRA before they proceed to appeal to the High Court.
This is likely to impact the taxpayer's right to access justice from the High Court and also hold up the taxpayer's money until a decision is made by the High Court.
In addition, the Bill proposes to increase excise duty on money transfer services by cellular phone service providers from 12 percent to 15 percent, meaning an increase in your M-Pesa or Airtel Money charges.
This is in addition to the excise duty that is being introduced to sugar, meaning the ordinary taxpayer will also have to bear with this if they add sugar to their tea.
Taxpayers who engage in betting or borrow from digital lenders may also be hit significantly by proposals in the Bill.
There are other tax wins and losses in the Bill that affect taxpayers but the above is a summary of the major ones that would affect the ordinary taxpayer.
The next step for the Bill is to go through public participation where some proposals may be deleted or added or varied before the Bill is passed by Parliament as an Act.
Taxpayers should look out for notices for public participation and have their issues or reservations addressed.
The writer is a Partner at Cliffe Dekker Hofmeyr incorporating Kieti Law LLP.