News, Press Release

Kenya’s Finance Bill 2018 will heavily tax the poor to fund development

In a bid to raise KES 3.07 trillion, the current Finance Bill 2018 seeks to fund state projects but risks heavily taxing the poor and making basic goods less accessible.

Nairobi, 13 August 2018 – A 12% tax increase on mobile money transfer, an increase from KES 7,205 to KES 10,305 per 1000 litres and an increase of KES 5 on each bottled water are some of the proposals found in the current Finance Bill 2018, which reflect announcements by the Finance Cabinet Secretary, Mr. Henry Rotich. The proposals affecting small businesses and key basic goods risks burdening the poor while lightening the tax load of the rich thereby contradicting current development goal of reducing inequality in Kenya as envisioned by the Big Four Agenda of the Jubilee Administration and Vision 2030.

Therefore, the Finance Bill still has too many contradictions to be passed in its current form. In addition to the tax increases on mobile money transfer, bottled water and kerosene, the Bill proposes 100% increment on late tax payments interests per month or part thereof, and a VAT penalty of 20% for any late tax payments, among others. Little or no taxes are mentioned in areas where it would make good sense to collect revenues. For instance, the Bill misses the opportunity to correct the problematic current cigarette tax structure which is two-tiers of KES 2,500 per mille for cigarette with filters and KES 1,800 per mille for plain cigarettes. This increases tobacco products affordability, therefore defeating the tobacco consumption reduction goal. Secondly, it leads to loss of revenue for the government.

In their Submission of Memoranda to the 12th Parliament’s 2nd Session,  The East Africa Tax and Governance Network (EATGN) together with other NGOs namely, Development Initiatives (DI), Institute for Economic Affairs Kenya (IEA-Kenya), Tax Justice Network Africa (TJNA), International Institute for Legislative affair (IILA) and the National Taxpayers Association (NTA), notes in relation to mobile money transfer taxes that: ‘‘The proposal is oppressive to the poor who have just started enjoying the benefits of financial inclusion (…) Marginalised people (poor, women, low income earners, the elderly, youth and other vulnerable persons) benefit from different streams of cash transfers under the National Safety Net Program. Often these transfers are made via mobile money. Hence an increase in the costs of transferring money ultimately reduces the amount of cash transfers that beneficiaries receive thereby severely affecting their livelihoods.’’

While it is important to recognise the urge of revenue raising to finance development, vigilance should remain on heavier tax load the Bill puts on the poor by taxing essential commodities and services, thereby hindering entrepreneurship by taxing small businesses. Rather than deepening the taxes as it currently proposes, the Finance Bill 2018 should broaden the tax base by improving the licensing system for artisans and traders.

Contacts: Farah Nguegan, Communication Manager (fnguegan@taxjusticeafrica.net)

*Photo credit: A. Trayler-Smith/ Panos

13/08/2018

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About TJNA

The Tax Justice Network-Africa (TJN-A) is a Pan-African initiative and a member of the Global Alliance for Tax Justice. Launched in January 2007 during the World Social Forum (WSF) held in Nairobi, TJN-A promotes socially- just, accountable and progressive taxation systems in Africa. It advocates for tax policies with pro-poor outcomes and tax systems that curb public resource leakages and enhance domestic resource mobilisation.

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