Tax Burdens Loom for Low-Income Workers: Proposed Finance Bill 2024 Targets Earners Below Ksh40,000
Employees earning less than Ksh40,000 monthly may face heightened tax burdens under proposed amendments to the Income Tax Act outlined in the Finance Bill, 2024.
If ratified, the Bill will establish a non-taxable threshold for various work-related allowances, such as subsistence and travel, at 5% of gross earnings, a departure from the current fixed rate of Ksh2,000 per day.
This shift means that individuals earning under Ksh40,000 would see a reduction in their non-taxable allowance from the previous Ksh2,000 daily rate to a lower amount, such as Ksh1,500 per day for someone earning Ksh30,000.
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Conversely, higher-income earners stand to benefit from the proposed increase in the non-taxable threshold.
During a session with the National Assembly on May 28, Deloitte and Touche LLP expressed opposition to the proposed amendment, advocating for its replacement with a clause that considers a daily reimbursement of up to Ksh5,000 for employees earning below Ksh40,000 monthly, exempting it from tax calculations.
The audit firm cautioned that the 5% proposal could escalate administrative expenses for employers lacking per diem policies, necessitating meticulous tracking of all allowances disbursed or facing full inclusion in Pay As You Earn (PAYE) assessments.
Furthermore, Deloitte and Touche LLP warned against subjecting financial services to a 16% VAT, citing potential cost escalations and adverse impacts on Kenya’s aspirations to become a financial hub and a gateway to Africa.
Tax Burdens Loom for Low-Income Workers: Proposed Finance Bill 2024 Targets Earners Below Ksh40,000