Finance Committee Rejects Tax on Bread and Motorcycles in Kes 3 Trillion Budget

The National Assembly Finance and National Planning Committee have rejected the imposition of tax on bread and the variation of excise duty on imported motorcycles. This comes as a relief to most citizens due to the hard economic constraints facing the country.

The proposal by National Treasury earlier sought to impose higher taxes on bread, motorcycles, betting, imported jewellery, and nicotine pouches to fund President Uhuru Kenyatta’s Kes 3 trillion budget. However, The planning committee argued that increasing the price of bread would go against the government’s big four agenda pillar on food security and raise the cost of living on the common citizens.

“Ordinary bread is a staple for most families today. We propose this to remain zero-rated because even if you say you are moving it to exempt, the cost will be put on Mwananchi through the raising of the cost of bread,” Chairperson Gladys Wanga.

A “zero-rated good,” means that the government doesn’t tax its sale but allows credits for the VAT paid on inputs. However, if a good or business is “exempt,” the government doesn’t tax the sale of the good, but producers cannot claim a credit for the VAT they pay on inputs to produce it.

Additionally, the Finance Committee wants locally manufactured confectionery to remain exempt from excise duty while raising the effective excise duty rate on imports from Kes.20 per kilo to Kes.35. The new proposal also seeks to retain baby formula as an exempt supply.

The Digital Services Tax (DST), which was to be imposed on digital services offered in Kenya, was also rejected in the finance bill. KRA was to invoice digital marketplaces for 1.5% of the gross transaction value.

However, gamblers are on the losing side as the Committee proposed a hike to excise duty on waged amounts from the proposed rate of 20 % to 30 %. Additionally,  gambling taxes will be imposed on all categories of betting, including gaming, prized competitions and lotteries.

The finance committee also proposed that the timeline given for the retention of key taxation documents by taxpayers be held at five years instead of the recommended seven years.

Further, the Committee wants transporters to be removed from the exempt list of taxable export services to retain the competitiveness of local logistic firms in the region.

Further proposals would see banks and SMEs vacated from new thin capitalization rules.

The Committee recommendations are set to lead Members of Parliament (MPs) in deliberating and passing the 2021 Finance Bill before the end of this month.

The recommendations however remain the subject of change by MPs.