MPs cut betting taxes, raise gas and loan levies

Parliament has cut taxes on winnings from betting and bread and rejected the push to eliminate new duty on cooking gas and bank loan fees.

The National Assembly Committee on Finance and National Planning cut the 20 percent tax on winnings to 7.5 percent, a boost to gamblers.

The MPs also lowered the Treasury’s proposal to reintroduce excise duty on betting to 7.5 percent from 20 percent that the State had published at end of April through the Finance Bill 2021.

The committee also rejected the Treasury’s proposal to change the way tax on bread is calculated in a shift that would have seen bakers stopped from seeking refunds from raw materials such as electricity that attract VAT.

This could have led to an increase in bread prices and pushed it out of reach of a majority of households that are grappling with Covid-19 economic hardships.

But MPs backed the Treasury’s bid to reintroduce the 16 percent value-added tax on cooking gas and a 20 percent excise tax on the fees and commissions earned on loans.

This means households will from July 1 pay at least Sh350 more for the 13-kilogramme cooking gas, adding to the pain of costly energy such as petrol and electricity.

The excise duty on bank loan fees will see banks pay the taxman more than Sh7 billion annually, which risks making credit costly for homes and businesses as lenders transfer the burden to borrowers.

The committee recommendations followed its review of the Finance Bill, which contains taxation measures for the new financial year starting July.

The National Assembly will vote on the recommendations ahead of becoming law on July 1.

"The proposed rate of excise on betting is high and may end up not achieving the intended revenue as most players will opt for international platforms for the betting activities," the committee chaired by Gladys Wanga said in its report on the Finance Bill, 2021.

The Treasury had sought to re-introduce the 20 percent tax on betting stakes through the Finance Bill 2021, as it eyed billions of shillings from punters annually.

Taxation regime

The 20 percent tax on betting stakes was introduced in 2019 but Parliament removed it last year through amendments to the Finance Act 2020 following lobbying by betting firms.

Punters currently pay 20 percent on their winnings but the parliamentary committee reduced it to 7.5 percent, saying the current taxation regime for betting is too high and has put off investors.

Bread is currently zero-rated, meaning bakers get VAT refunds on the raw materials used to manufacture the commodity.

"The proposal would result in increase of the price of bread, which is consumed by a majority of Kenyans who are already struggling with the negative current economic climate as a result of the Covid-19 pandemic," says the committee.

The Petroleum Institute of East Africa (PIEA), a lobby for oil marketers, had petitioned Parliament to postpone the re-introduction of the 16 percent tax from July 1 in a bid to encourage use of LPG and cut reliance on dirty fuels like charcoal and illuminating kerosene.

MPs rejected the push, saying it would hurt tax collections.

The lawmakers also rejected a plea from bankers to exclude fees and commissions earned on loans from the 20 percent excise duty.

The Kenya Bankers Association (KBA), a lobby for the lenders, had argued that imposition of excise duty on fees and commissions would raise the cost of borrowing and hurt access to credit at a time businesses and households were looking for cash to recover from the knocks of the Covid-19 pandemic.