Some of the new tax measures that Treasury Secretary Henry Rotich proposed in his Budget Statement last Wednesday came into force hours after they were submitted to Parliament, causing consumers instant pain.
Through the Finance Bill 2016, which was not immediately made available to the public, Mr Rotich instituted far-reaching tax measures that immediately raised the cost of cosmetics, high-end imported motor vehicles, kerosene as well as plastic bags and sacks.
The measures include an amendment to the withholding tax law that is being applied retrospectively from January 19, throwing suppliers (and their tax advisers) into confusion on how to handle the levy, which the law now says they should have collected.
The pain of surprise in the new tax measures is exacerbated by the fact that Mr Rotich only mentioned July 1 as the effective date in his one and a half hours budget statement, leaving the erroneous impression that the changes were at least a fortnight away.
“The speech is a snapshot of tax measures whose implementation is explained in-depth by the Finance Bill,” Lillian Kubebea, a partner with Deloitte told the Business Daily in an interview.
“I think it is unfair for the minister to hit Kenyans with taxes that take effect immediately. The least that the CS [Cabinet Secretary] should have done was to specifically single out taxes that were due to take effect immediately.”
The immediate application of the stealth tax measures means the prices of cosmetics and beauty products like manicure and hair products as well as make-up sets are now subject to excise duty of 10 per cent, amounting to an instant rise in retail prices for women.
Mr Rotich is seeking to raise up to Sh800 million in taxes from the cosmetics industry whose total value is estimated at Sh8 billion in a bid to arrest the Kenya Revenue Authority’s (KRA) collection shortfalls.
Another tax measure that came into effect Thursday is the Sh7.205 duty on every litre of kerosene, an increase the minister justified as necessary to curb its use in adulteration of petroleum.
The Energy Regulatory Commission (ERC), however, did not factor this tax into the new monthly retail prices it announced yesterday, raising the cost of kerosene to Sh50.80 from Sh46.98.
Kerosene is mostly used by low-income earners who will henceforth part with more to purchase the fuel popularly used to cook and light homesteads.
Source: Business Daily