KRA Preps New Taxes: Workers Brace for Pay Shock!
If the Court of Appeal lifts the conservatory orders preventing the implementation of the Finance Act 2023 in its expected ruling on Friday, July 28, 2023, employed citizens across the nation are in for a rude awakening.
The Court of Appeal is anticipated to rule on the petition filed by Treasury Cabinet Secretary Njuguna Ndung’u through Attorney-General Justin Muturi, citing difficulties in executing government expenditure due to the stalled implementation of new taxes intended to raise an additional Sh211 billion in the current fiscal year.
Lifting the conservatory orders would result in the retroactive implementation of provisions with a July 1 effective date, such as the introduction of a housing tax of 1.5% of total pay matched by the employer.
The introduction of the 32.5 percent tax rate for those earning between Sh500,000 and Sh800,000 per month and the 35 percent tax rate for those earning more than Sh800,000 per month would also affect Kenyan laborers.
Retroactive implementation
Even though the July payroll would have been processed by the time such orders are rescinded, the taxman will be able to collect the July shortfall from the August payroll due to retrospective application.
The Kenya Revenue Authority (KRA) has instructed its officials to have the necessary systems in place should the conservatory orders be rescinded, as reported by The Nation.
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“On June 26, the Finance Bill 2023 was signed into law. As you may know, the High Court issued orders suspending the implementation of the Finance Act 2023 on June 30, 2023. Until such orders are rescinded or modified, it is illegal for us to implement the provisions of this law. Subject to court orders, the ICT division should work closely with the revenue departments to ensure that the system is set to support the implementation of the Act, according to a KRA memo.
Should the conservatory orders be lifted, individuals with a gross monthly salary of 5h600,000 will see a reduction of 5h11,473 in net pay to 5h413,943.
This would be due to the new tax rate of 32.5 percent and the housing tax of 1.5 percent. The take-home pay of Kenyans earning 5h800,000 per month will decrease from Sh565,416 to Sh548,988 after the housing tax and the 35% tax rate are accounted for.
“All officers should review this circular and the specific provisions of the Finance Act of 2023,” In addition, the officers are informed that the provisions of the Act will take effect on the dates specified in Section 1 of the Act. The Act establishes the effective dates of July 1, 2023, September 1, 2023, and January 1, 2024″, the KRA memo adds.
Employers are processing their July payrolls based on the provisions of the Finance Act 2022, according to the Federation of Kenya Employers (FKE), pending guidance from the courts.
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“Conservation orders imply that nothing will change for the time being.” “Until the courts rule otherwise, we will continue to manage payrolls and calculate statutory deductions as we have always done,” said FKE Executive Director Jacqueline Mugo.
Conservation of energy
On June 30, the High Court issued conservatory orders prohibiting the implementation of the Finance Act 2023. Later, the case was forwarded to the Chief Justice for the formation of a bench to hear the petition lodged against the Kenya Kwanza government’s inaugural revenue-raising plan.
To hear the petition, Chief Justice Martha Koome has since formed a bench consisting of justices David Majanja, Lawrence Mogambi, and Christine Meoli.
KRA Preps New Taxes: Workers Brace for Pay Shock!
