Finance Bill 2024: MPs drop plan to tax bread and motor vehicles

Finance Bill 2024: MPs drop plan to tax bread and motor vehicles

President William Ruto’s government has bowed to public pressure and backtracked on some of the punitive taxes and levies that had been proposed in Finance Bill 2024.

Bread lovers, motor vehicle owners, pensioners, and farmers are among the biggest winners in changes that MPs made to bill, which, overall, has attracted public outcry and condemnation. 

In changes announced at State House, Nairobi, the National Assembly’s Finance Committee on Tuesday said it had dropped a proposal to charge 16 percent value-added tax on bread.

Also struck out is the proposed value-added tax on transportation of sugar, financial services and foreign exchange transactions.

Housing levy

“There is no increase in mobile money transfer,” said Finance Committee Chairman Kimani Kuria who read the statement after a meeting chaired by President William Ruto.

At the same time, monies deducted from salaried employees’ payslips for the housing levy and the Social Health Insurance Fund will be excluded from the amount subjected to Pay As You Earn (PAYE) tax requirement.

“This means the levies will not attract income tax, putting much more money in the pockets of employees,” Mr Kuria said. 

Only imported eggs, onions and potatoes will be subject to excise duty, as the proposed Eco Levy is modified to only apply to imported finished goods, in a win for women and girls. 

“It is crucial to point out that Eco Levy is being levied on imported finished products. Locally manufactured products will, therefore, not attract the Eco Levy. Locally assembly and manufacturing will help boost Kenya’s manufacturing capacity, create jobs and save foreign exchange,” said Mr Kuria.

“Consequently, locally manufactured products, including sanitary towels, diapers, phones, computers, tyres and motor cycles, will not attract the Eco Levy.”

Mr Kuria communicated the changes after a Parliamentary Group Meeting chaired by Dr Ruto as he sought to rally his troops to back the plan to finance his ambitious Sh3.9 trillion Budget for 2024/25 financial year.

#OccupyParlliament

He spoke as police battled Kenyans who took to the streets of Nairobi to express their anger against the bill in a protest dubbed #OccupyParliament.

Mr Kuria said the that bill that the committee would present to Parliament on Tuesday afternoon is “substantially different from the original”, as he sought to calm down the protesters.

The threshold for VAT registration has also been increased from Sh5 million to Sh8 million. “This therefore means that many small businesses will no longer need to register for VAT,” said Mr Kuria.

The electronic invoicing ETIMS, which was recently introduced by KRA, has also been scrapped for farmers and small businesses with a turnover of below Sh1 million.

Alcohol content 

Alcohol consumers, however, have not been spared the proposed taxes, with lawmakers only making slight changes to the mode of taxation.

“Excise duty on alcoholic beverages will now be taxed on the basis of alcohol content and not volume,” said Mr Kuria

“The higher the alcohol content the more excise duty it will attract. Consequently, alcohol manufacturers are expected to make safer and cheaper alcohol.”

On education, the committee report shows Sh18 billion has been provided for the employment of all 46,000 junior secondary teachers who are on internship, a day after reports emerged that only Sh13 billion had been budgeted.

Intern teachers

“Funds have also been provided to hire 20,000 interns next month. The policy is now to transition teachers from internship to permanent and pensionable terms.”

National Assembly Majority Leader Kimani Ichung’wah called on Kenyans to remain peaceful as their views had informed most of the changes that were made to the proposed law.

“To the public-spirited Kenyans who had intended to occupy Parliament, there is absolutely no debate today,” he said, noting that debate would start on Wednesday morning.​

Reported by Justus Ochieng, Elvis Ondieki and Harry Misiko.