economy
MPs lower betting taxes, increase gasoline and credit taxes
Wednesday June 23, 2021
The Chair of the National Assembly Committee on Finance and National Planning Gladys Wanga (Homa Bay Women’s Representative). FILE PHOTO | NMG
Parliament has cut taxes on winnings from betting and bread and has rejected the move to abolish the new taxes on cooking gas and bank loan fees.
The National Assembly’s Finance and National Planning Committee cut corporate income tax from 20 percent to 7.5 percent, giving players a boost.
MPs also cut the Treasury Department’s proposal to reintroduce the 20 percent excise tax on bets, which the state published in late April, to 7.5 percent through the 2021 Finance Act.
The committee also opposed the Treasury Department’s proposal to change the way bread tax is calculated in a postponement that would have discouraged bakers from claiming refunds for raw materials such as electricity that are subject to VAT.
This would have spiked bread prices and put it out of reach for the majority of households grappling with the economic hardship of Covid-19.
But MPs backed the Treasury Department’s offer to reintroduce 16 percent sales tax on cooking gas and a 20 percent consumption tax on fees and commissions earned on loans.
This means that from July 1st, households will pay at least 350 Sh350 more for the 13-kilogram gas to cook with, adding to the pain from expensive energy such as gasoline and electricity.
The excise tax on bank loan fees will result in banks paying the tax officer more than 7 billion shutters annually, which risks making loans expensive for households and businesses as lenders put the burden on borrowers.
The committee’s recommendations followed the review of the Finance Act, which contains tax measures for the new fiscal year from July.
The National Assembly will vote on the recommendations before they come into force on July 1st.
“The proposed excise tax rate for betting is high and may not ultimately generate the intended revenue as most players will choose international platforms for betting activities,” said the committee chaired by Gladys Wanga in its report on the 2021 Finance Act.
The Treasury had tried to reintroduce the 20 percent tax on betting stakes through the Finance Act 2021, as it had billions of shillings in mind from players every year.
Tax system
The 20 percent tax on betting stakes was introduced in 2019, but Parliament abolished it last year through amendments to the Finance Act 2020 following lobbying by betting firms.
Players currently pay 20 percent on their winnings, but the parliamentary committee cut it to 7.5 percent because the current taxation on bets is too high and has put off investors.
Bread is currently taxed at zero, which means bakers are reimbursed the VAT on the raw materials used to make the goods.
“The proposal would lead to an increase in the price of bread, which is consumed by a majority of Kenyans who are already struggling with the current negative economic climate due to the Covid-19 pandemic,” says the committee.
The Petroleum Institute of East Africa (PIEA), a lobby for oil marketers, had asked parliament to postpone the reintroduction of the 16 percent tax from July 1 to encourage the use of LPG and dependence on dirty fuels such as Charcoal and enlightening kerosene.
MPs opposed the move, saying it would affect tax collections.
The legislature also rejected a plea by bankers to exclude fees and commissions from loans from the 20 percent consumption tax.
The Kenya Bankers Association (KBA), a lobby of lenders, had argued that imposing excise taxes on fees and commissions would increase borrowing costs and reduce access to credit while businesses and households looked for cash to keep themselves from the strikes Covid-19 pandemic.