The Law Society of Kenya (LSK) has raised concerns over Finance Bill 2024 warning about the potential implications the proposals within the proposed legislation will have on Kenyans if it sails through.
LSK in a statement on June 12, 2024, highlighted key amendments in the Bill strongly opposing several proposed additional taxes warning that they impose burdens on lower-income Kenyans, directly impacting their means of livelihood and quality of life.
“Finance Bill 2024 aims to expand the tax base and increase revenue collection from Kenyan citizens.
However, the Law Society of Kenya (LSK) is concerned about the potential implications of higher taxes and their impact of the regression in national equality. This in itself is an antithesis to the national goals and objectives,” read part of the statement.
The Society led by its President Faith Odhiambo highlighted the significant changes introduced by the Bill which are set to affect Kenyans and elaborated on their far-reaching implications.
LSK further outlined the key amendments and their potential impacts, focusing on tax certainty, cost of living, and the rule of law.
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Under Cost of Living, the lawyers pointed out that the Bill introduces various provisions that will increase the cost of living for many Kenyans and highlighted proposed taxes that they want Kenyans spared from.
Taxes Opposed by Lawyers
LSK highly opposed listed proposals in the Bill saying that they will make life more expensive for a significant portion of the population, adding financial strain to already burdened households.
Among the proposals flagged by LSK include the proposal to standard-rate bread, which will increase its cost, and the proposal in the Bill to impose a motor vehicle tax at the rate of 2.5% of the value of the motor vehicle, which we view with great concern.
“Overall, the proposed motor vehicle tax will have widespread and detrimental effects on both consumers and businesses, and it is our proposal that the same is deleted,” said LSK.
Other proposals flagged by the lawyers are the increase of excise duty rates from 15% to 20% on telephone and internet data services, fees charged for money transfer services by banks, money transfer agencies, and other financial service providers, as well as fees charged for money transfer services by cellular phone providers.
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The proposals to introduce an eco-levy on certain goods and products listed in the Fourth Schedule of the Miscellaneous Fees and Levies Act and the proposal to repeal Section 14 of the Excise Duty Act (the EDA), were also flagged by the lawyers.
Under the rule of Law, the lawyers have highlighted several proposed amendments in the Bill which according to them raise concerns regarding the rule of law and its adherence in Kenya.
LSK Cites Finance Bill Proposals that Undermine Rule of Law
Some of the proposals highlighted include empowering the Kenya Revenue Authority (KRA) commissioner to automatically disallow a taxpayer’s objection if the taxpayer fails to provide the requested information within a specified period.
According to LSK, this proposed amendment grants excessive power to the Commissioner, potentially leading to unfairness and hindering access to a fair hearing for taxpayers.
“Additionally, it removes the taxpayer’s right to appeal to the Tribunal if the Commissioner decides to disallow the taxpayer’s objection, given that the provision in its current drafting does not require issuing a formal decision, leaving taxpayers with no recourse for appeal,” added LSK.
Further, the lawyers highlighted the proposed removal of the prohibition on the Commissioner from issuing agency notices when a taxpayer appeals to the Tax Appeals Tribunal or High Court.
The Society warned that if enacted, this proposal would allow the Commissioner to enforce tax collection of disputed taxes through agency notices even when a taxpayer has appealed against the tax in dispute.
LSK warned that such a situation could lead to injustices as taxpayers may be compelled to pay taxes under dispute without a fair resolution in the appeal process.
Lastly, the lawyers highlighted the proposal to exempt the processing of personal data by the KRA from the provisions of the Data Protection Act 2019.
In its view, LSK asserts that the proposed unlimited access to personal data, without court orders or proper procedures pose certain risks.
These include infringing upon taxpayers’ rights to privacy and posing a risk of data misuse.
“For this reason, we consider such a move unconstitutional and a violation of the rule of law,” said LSK.
Tax Certainty
Under tax certainty, the Law Society stated that it has noted the numerous proposals outlined in the Bill, which appear to reverse or diminish the various exemptions and benefits that were previously established by the Finance Act of 2023.
However, despite the criticism levied on the Bill, LSK argued that the Bill has in place various provisions that are taxpayer friendly and progressive in a bid to make Kenya’s taxation regime compliant with international best practices.
For example, LSK sighted the proposal to introduce an Advance Pricing Agreements (APA) in respect to transfer pricing transactions.
The statement by LSK comes after Public Service Cabinet Secretary Moses Kuria hit at the Society for its position on the Finance Bill 2024.
Kuria while speaking in an interview on June 11 argued that raising taxes is within the legitimate right of the government.
“What I have a problem with is the position of the LSK. It is within the legitimate right of the government to raise taxes. There is no other source of money to run the government except taxes,” said Kuria.
The Finance Bill has been opposed by a section of different stakeholders including companies operating in Kenya which have warned of various implications to the economy.
The Departmental Committee on Finance and National Planning concluded the two-week public participation exercise on the Finance Bill, 2024 on June 7.
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