Kenyans will have to wait longer for some of the tax benefits that Treasury secretary Henry Rotich announced in his Budget Speech earlier this month, even as they suffer the pain of new taxes that took effect immediately, the Business Daily has learned.
The implementation of beneficial tax measures such as reduced Pay-As-You-Earn (PAYE) for lowest-paid workers and elimination of taxes on bonus payments and airtime have been spread out over the next six months, according to Finance Bill 2016.
Besides, retailers have yet to pass on to consumers the benefits of liquefied petroleum gas’ (LPG) exemption from 16 per cent value added tax (VAT) — though the law says it should have come into force a day after the June 8 Budget Speech when a raft of new tax measures came into force.
The schedule for implementation of the new tax measures indicates that the government has prioritised collection of more revenue, throwing execution of the tax relief measures to the back banner.
The list of new tax measures that came into force immediately includes the 10 per cent excise tax on cosmetic and beauty products, the Sh7.2 per litre excise tax on kerosene and a 20 per cent ad valorem tax on motor vehicle imports that immediately inflated the cost of luxury cars.
The ad valorem tax ended the lower fee that importers of high-end cars enjoyed under the revoked regime, which lasted seven months. Under that regime, excise duty was fixed at Sh150,000 for cars aged less than three years and Sh200,000 for those older than three years.
The Finance Bill 2016 says the current PAYE tax structure will remain in force until January next year when the tax bands and monthly personal relief (MPR) will be expanded by 10 per cent each.
The new PAYE bands will see the workers’ tax bill fall by a few hundred shillings, mainly from expanding the MPR to Sh1,278 from the current Sh1,162. Those earning Sh50,000, for instance, will enjoy the biggest benefit of Sh616.
“These measures are meant to cushion the workers from high cost of living and demonstrate our commitments to sharing economic growth,” Mr Rotich said.
Delaying the introduction of the new PAYE bands and the MPR to January will, however, eat into most of the tax savings, mainly because the cost of living continued to rise at the rate of about 6.5 per cent in the 12 months to May.
LPG retailers have continued to charge 16 per cent VAT despite the Finance Bill stating that the tax should have been eliminated on June 9.
It was not possible to establish why the Kenya Revenue Authority (KRA) has continued to collect the tax beyond the said date, but the retailers insisted the taxman continues to collect the tax.
At the current price of Sh2,350 for a 13-kg cylinder, retailers are incorporating a VAT of about Sh400. Once eliminated, the price of a similar quantity of LPG should fall to Sh2,000.
Credit: Business Daily