President William Ruto’s administration has hatched a plan to impose more taxes on Kenyans should the controversial Finance Act 2023 flop.
The new taxes include a motor vehicle circulation tax, Excise, and value-added tax (VAT) measures.
While making disclosures to the International Monetary Fund (IMF), the National Treasury revealed that this will enable the government to fund the ambitious Ksh.3.68 trillion budget should the Courts block the piece of legislation.
The Court of Appeal is set to deliver a ruling on Friday, July 28 on the suspension of the Finance Act 2023, as sought by the National Treasury Cabinet Secretary Prof Njuguna Ndungu.
On VAT, the Treasury could include streamlining of apportionment ratio of allowable input VAT on exempt supplies to align it with international practices and reducing VAT exemptions by the end of this month.
In other words, if the treasury fulfills these promises, Kenyans will have to contend with punitive levies, which will further push up the cost of living.
CS Ndungu said they will submit the tax proposals to Parliament for approval by end of October this year alongside the first supplementary budget for Financial Year2023/2024.
The IMF Deputy Managing Director Antoinette Sayeh backed up Treasury’s alternative plan to raise revenue.
“The authorities commit to take corrective measures on tax revenues to remedy the underperformance in taxes and ensure it does not impact achievement of the FY2023/24,” IMF said.
The motor vehicle circulation tax
The motor vehicle circulation tax is a road tax paid by motorists to use public roads. It is calculated based on the value of the vehicle, the engine and seating capacities.
Furthermore, official estimates indicate that Kenya has 4.53 million vehicles with the number of motor vehicle imports surging.
Kenyans are already feeling the pinch after the Finance Act 2023, doubled VAT on petroleum products from 8 percent to 16 percent.