The Treasury’s decision to drop proposals to introduce a top tax band of 35 per cent on monthly incomes above Sh750,000 and that for raising capital gains tax is likely to help push through laws in Parliament.
Analysts at Ernst & Young (EY) see the move as a smart way of scrapping interest rate caps.
The analysts on Monday said Treasury Cabinet Secretary Henry Rotich seems to have picked his battles carefully with MPs, who have clearly indicated that the repealing of the one-year-old law will not be a walk in the park.
“There is a proposal here which politicians won’t take lightly. The CS is proposing to scrap that law (the Banking Amendment Act, 2016), which they did and owned. Then you come and introduce a proposal to increase a higher tax band of 35 per cent on income above Sh750,000 per month, and an increase in capital gains tax from five per cent to 20 per cent. I don’t think he is ready to take many battles with MPs,” said EY partner for transaction advisory services Anthony Muthusi.
Mr Rotich on Thursday proposed to amend the Banking Amendment Act, 2016 by repealing section 33b of the said law.
This refers to the cap on interest rates for commercial lenders.
In the Income Tax Bill, 2018, the Mr Rotich had proposed to introduce the top tax band and increase the capital gains tax.
“However, during the public consultations on the bill, members of the public raised concerns on these proposals and were of the view that the higher rates are not appropriate at this time. We have considered these concerns and resolved to revert to the rates contained in the current Income Tax Act,” Mr Rotich claimed.
The Budget was read last week.