Ruto’s Surprise Tax Proposal Amid Finance Act Legal Battle
President William Ruto is under pressure to increase revenue to fund the 2023/24 Budget, as the Finance Act, 2023 is on the verge of collapse.
According to an IMF staff country report seen by GossipA2Z, the National Treasury is preparing to levy additional taxes on Kenyans only a few months after facing intense scrutiny for ramming through the Finance Act of 2023.
The document indicates that the government is considering implementing a motor vehicle circulation tax, a proposal that is likely to be met with stiff opposition from automobile industry players.
The proposed motor vehicle circulation tax could result in the implementation of toll station fees and taxes based on engine capacity, vehicle weight, and vehicle age.
On the other hand, the government indicated that, if necessary, it was also willing to reduce spending on non-essential commodities.
According to the 120-page document, the new measures could be implemented in October when the supplemental budget is introduced.
Positively, the government is also considering reducing the tax exemption on interest income, a move that is likely to increase investment and encourage reserves.
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“Should the approved 2023 Finance Bill result in a weakening of the revenue package (1.6% of GDP) supporting the Budget proposal and/or FY2022/23 tax underperformance be greater than anticipated at the time of submission of Supplementary II FY2022/23 Budget, we will take several corrective tax measures,” the document states.
“These measures could include streamlining the VAT apportionment ratio of allowable inputs VAT on exempt supplies by the end of July 2023 to align it with international practices and reduce VAT exemptions,” the document states.
Following the suspension of the Finance Act 2023 by the High Court pending a hearing and determination of the matter, its success is still uncertain.
The High Court ruling followed a petition lodged by Senator Okiya Omtatah of Busia challenging several tax proposals in the Act.
Among the contentious proposals were the decision to raise the petroleum tax from 8% to 16% and the introduction of a 1.5% Housing Fund tax, among others.
The revelation that the government is considering increasing taxes on Kenyans has already sparked outrage, with Azimio la Umoja urging Kenyans to participate in the ongoing anti-government demonstrations.
“We have united in opposition to the Finance Bill! Kenya Kwanza now intends to raise VAT as punishment! Today, let’s demonstrate our strength in increased numbers. We will not allow their proposal to raise the VAT to see the light of day,” Azimio stated.
When seeking a Ksh142 billion loan from the Bretton Woods institution, Treasury submitted its proposals to the IMF.
Since then, the loan has been approved.
Ruto’s Surprise Tax Proposal Amid Finance Act Legal Battle
