[ad_1]
Economy
Kenyans braced for tough July as President Ruto taxes take effect
Monday June 19 2023
National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u poses for a photo with a briefcase containing the 2023/2024 budget statement before proceeding to Parliament Building on June 15, 2023. PHOTO | LUCY WANJIRU | NMG
Small businesses, social media influencers and top earners will be among the first to be hit by the new taxes in two weeks, coinciding with the period that fuel will also start attracting higher taxes.
The new taxes in the Finance Bill 2023 have three effective dates— July 1, 2023, September 1, 2023 and January 2024.
But the Kenya Kwanza administration has put the effective dates of most taxes next month, as it eyes money to fund the Sh3.68 trillion budget.
Read: Mixed bag for taxpayers in revised Finance Bill
Small businesses with annual sales revenues of between Sh1 million and Sh25 million will from July pay a three percent turnover tax, a rise from the current one percent charged on those with gross sales of between Sh1 million and Sh50 million.
Social media influencers—such as those advertising brands— will also start paying five percent withholding tax on their gross revenue earned with respect to digital content creation.
Also set for July is the doubling of value-added tax (VAT) on petroleum from eight percent to 16 percent in a move that will send pump prices of petrol, diesel and kerosene to a record high.
The proposed hike in VAT on fuel will have a ripple effect on the economy, with the prices of goods set to rise given diesel and petrol are a cost factor in production and transport to the market.
This could keep inflation outside the targeted range of between 2.5 percent and 7.5 percent.
High-income earners will also see increased taxes on their gross salaries come July if the proposal to introduce two additional tax bands of 32.5 percent and 35 percent is endorsed by Parliament this week.
The government wants a departure from the current band where maximum tax on income above Sh32,333 is taxed at 30 percent.
Now income between Sh500,000 and Sh800,000 will be taxed at 32.5 percent as that above Sh800,000 incurs 35 percent tax.
The pain on payslips will be worsened by a 1.5 percent monthly levy deducted on gross monthly pay starting July, even as the government eyes another 2.75 percent deduction on gross pay towards the National Health Insurance Fund as opposed to the current range of between Sh150 and Sh1,700.
This will also be the month when the Kenya Revenue Authority (KRA) will start taxing mileage allowance that is above the tax-free mileage allowance as approved by the Automobile Association of Kenya.
July will also get tough for gamblers as the government seeks to increase the rate of excise duty on betting, gaming, prize competition and lotteries from the current rate of 7.5 percent to 12.5 percent.
The only reprieve for gamblers will be that the five percent withholding tax will be applied on the difference between the payout and the amount staked as opposed to the full payout as it is currently.
The State will in the same month introduce a 15 percent withholding tax on fees charged on advertisements for alcoholic beverages, betting, gaming, lotteries and prize competitions in media, including television and newspapers.
Importers of fish will in the same month start paying 10 percent excise duty or Sh100,000 per metric tonne, whichever is higher.
The move, though meant to protect the market for local fish, may trigger price hikes unless local supply is stepped up.
Importers of sugar, powdered juice, furniture, plastic and rubber products, paper and paper products, safety matches, particle boards, and plywood among other goods of timber will also see increased custom duties.
Among the few gains for households next month will be the removal of the eight percent VAT and other levies on cooking gas. This is expected to reduce the cost of cooking gas.
July will also see a reduction of the excise duty rate on mobile money transfer from 12 percent to 10 percent as that on money transfer by banks, money transfer agencies and other financial services drop from 20 percent to 15 percent.
Members’ clubs and trade associations will be among those getting some relief in July as the government intends to start excluding joining fees and subscriptions when determining the income to tax.
The reduction in the rate of monthly residential rental income tax from 10 percent of the gross rental receipts to 7.5 percent will also take effect next month, offering relief for landlords since they will start paying less tax on rental income.
However, the landlords will have to remit the tax within five working days of collecting. The State aims to reduce the time for accounting for withholding tax and capital gains from 20 days after the month of the transaction to five working days after the transaction.
July will also be the month that the KRA commissioner will lose the discretion to make annual inflation adjustments for excise duty.
September will see the introduction of a digital asset tax at the rate of three percent on the value of digital assets such as cryptocurrencies being transferred or exchanged.
The controversial 10 percent export and investment promotion levy on imported clinker, steel and paper products will also start in September amid opposition from a section of sector players.
January next year will also come with its own bag of taxes, starting with an increase in the rate of advance tax for vans, pick-ups, trucks, prime movers, trailers and lorries from Sh1,500 per ton of load capacity per year or Sh2400 per year to Sh3,000 per ton of load capacity per year or Sh5,000; whichever is higher.
The tax rate will also be increased for saloon cars, station wagons, minibuses, buses and coaches from Sh60 per passenger capacity per month or Sh2,400 per year to Sh100 per passenger capacity or Sh5000 per year.
Read: Finance Bill a huge boost for fintech start-ups next year
But there will be some relief for those saving for post-retirement medical fund relief since their monthly savings will give them a 15 percent relief on the contributions or Sh60,000 per year whichever is lower.
[ad_2]
Source link