Reject new taxes on flour, MPs told
National Treasury Cabinet Secretary Ukur Yatani (right) and National Assembly Finance Committee chairperson Gladys Wanga pose for a photo at Parliament Buildings ahead of the reading of the budget statement last month.
The Kenya Association of Manufacturers (KAM) wants MPs to reject proposed taxes on essential goods, saying the action will lead to job losses and increase the cost of living.
This comes as players in the financial industry warn against the proposal to have companies and individuals in dispute with Kenya Revenue Authority (KRA) over tax demands to deposit 50 per cent of the amount in question in a Central Bank of Kenya (CBK) account.
The proposed taxation is contained in the Finance Bill, 2022 that is being subjected to public participation by the Finance and National Planning Committee of the National Assembly.
The panel is chaired by Homa Bay Woman Representative Gladys Wanga.
The bill seeks to raise additional Sh50.4 billion to finance the Sh3.33 trillion budget for the 2022/23 financial year.
In the budget highlights by National Treasury Cabinet Secretary Ukur Yatani on April 7, the government intends to raise about Sh2.1 trillion to finance its budget, leaving a deficit of Sh846 billion.
To plug the hole, the Finance Bill seeks to increase taxes on maize and wheat flour, motorcycles, cosmetics, jewellery, alcohol, chocolate and bottled water.
The bill seeks an increase in duty on motorcycles to Sh13,403.64 per unit from Sh12,185.16, beer (10 per cent), spirits (20 per cent), locally and imported glass (25 per cent), alcohol advertising fees (15 per cent) and cosmetics and beauty products at 15 per cent.
It proposes the removal of relief on maize and wheat flour that will now attract 16 per cent Value Added Tax (VAT).
This means the cost of the two products consumed in large quantities will go up, exacerbating the burden of living for an already suffering taxpayer.
Appearing before the committee yesterday, KAM chairman Mucai Kunyiha said the proposed taxes would hurt ordinary Kenyans.
“The economy is under significant inflationary pressure and is still fragile after the pandemic. Increasing taxes will add more pressure on the economy and consumers,” Mr Kunyiha said.
He added that any proposed increase in tax should be based on specific rates before the 2022 inflation adjustment.
Treasury has also proposed a 10 per cent tax on fruit and vegetable juice.
It seeks an increase of tax from Sh12.17 to Sh13.30 per litre of the juice.
Ms Wanga said more than 100 memorandums have been filed at the committee, adding that over 60 physical meetings with stakeholders are planned.
“As a committee, we will listen to all players and see how their views will help us strike a balance between the interests of the country and those of the people,” the Homa Bay Woman Representative said.
“Presentations by stakeholders will be key in amending the bill on the floor of the House.”
Mr Kunyiha told lawmakers that the proposed 15 per cent tax on cosmetics and beauty products is unjustified.
“Personal care products are not luxury goods but daily necessities. The proposed tax should be removed or at most be set at five per cent,” he said.
He added that input costs have risen tremendously, affecting consumer prices.
“If the tax increases, consumers will turn to cheap counterfeits. The illicit trade of cosmetics deprives the government large amounts of revenue,” Mr Kunyiha said.
KAM said the local industry is still young and needs to be encouraged to grow.
The proposal to increase duty on ice cream and other edible ice, whether containing cocoa or not, by 15 per cent has also been criticised.
Mr Erastus Omollo, who was at the committee on behalf of the Institute of Certified Public Accountants of Kenya, said while it appreciates the need to mobilise domestic revenue, the proposal to amend the Tax Appeals Tribunal Act to require 50 per cent deposit of the disputed amount is unconstitutional.
“This will not cure delays associated with the resolution of tax disputes,” Mr Omollo said, adding that countries like the United Kingdom and the United States have entrenched specific timelines on resolution of tax disputes.
