The Finance Bill 2024 continues to spark debate due to its potential impact on the financial well-being of Kenyans. Many have expressed concerns about the impending burden it places on citizens through increased taxation.
However, amid this apprehension, the Bill offers a glimmer of relief and hope. One of the commendable proposals is the adjustment of non-taxable benefits for employees which has not been reviewed for close to two decades.
The amendment seeks to align the current limits with the economic landscape, providing much-needed relief to employees and granting flexibility to employers in enhancing their employment packages.
It adjusts the non-taxable daily limit of allowances for employees working outside their usual place of work to 5 percent of their monthly gross earnings.
By pegging this cap to a percentage of the employee's monthly gross earnings, the amendment recognises and accommodates the diverse compensation needs of individuals across different employment levels.
The increase in non-taxable benefits aligns with the escalating cost of living, offering much-needed relief to individuals who have been constrained by thresholds that have failed to keep pace with inflation.
The Central Bank of Kenya's data reveals that the value of the Kenyan shilling against the US dollar has significantly weakened over the years. In 2006 (when the non-taxable daily limit of the allowance was last reviewed), the average exchange rate was Sh70 to the dollar, while the current rate stands at Sh130 to the dollar, nearly double the 2006 rate.
In light of these economic challenges, the proposed amendments are a means to empower employers to provide more attractive employment packages, ultimately benefitting the entire workforce.
However, there are areas that require further clarity and definition. For instance, explicit definitions of terms such as "gross earnings" and clear guidance on the requirements for employers to maintain policies for payment and accounting for subsistence allowances would be necessary for effective implementation.
The writer is the Finance Director at Multichoice Kenya.
