Banks are warning that hiking of taxes levied on financial transactions as proposed in the Finance Bill 2024 could see Kenyans adopt informal banking methods including mattress banking.
The Kenya Bankers Association (KBA) is also concerned that if proposals in the Finance Bill 2024 are adopted, the country would see a surge in money laundering activities, popularly known as ‘wash wash’.
KBA officials tabled their concerns while appearing before the National Assembly’s Departmental Committee on Finance and National Planning on Tuesday, June 4.
Further, Electric Mobility Association of Kenya appealed to maintain the incentives offered to the sector in the Finance Act 2023, highlighting the importance of these incentives in reducing greenhouse gas emissions.
Some tech companies including M-Kopa Limited and M-Kopa Mobility Kenya Limited opposed the change in VAT rates on locally assembled mobile phones, expressing concerns that it would hinder the affordability and accessibility of smartphones for Kenyans.
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Kuria Kimani Clarifies 16% VAT in Finance Bill 2024
Finance Committee Chairperson Kuria Kimani assured stakeholders during the ongoing Public Hearings on the proposed law that any misunderstandings, especially regarding Clause 34 (b)(i) proposing a 16% VAT on certain financial services, will be cleared up.
Clarifying the VAT proposal, Kimani pointed out that the tax would apply only to the transaction fee of foreign exchange, not the entire value of the transaction.
“We acknowledge that there are a few provisions that are not clear on the Bill which we need to clean up. I also wish to clarify that the proposed imposition of VAT is on the fee charged on the foreign exchange transaction, rather than on the value of the foreign exchange”, finance committee chairperson Hon. Kuria added.
Committee Members, led by Vice Chairperson Benjamin Langat and Joseph Oyula, emphasized the importance of public hearings in shaping the proposed law.
They reassured stakeholders that the Committee is focused on listening to the people’s views and making informed decisions for a beneficial law.
Also Read: EABL Warns of Mass Layoffs in Kenya Over Proposed Finance Bill Taxes
“We are here for the people of Kenya and to listen to their views. We are not here to punish anybody. We will collate all your views and carefully review them before presenting them to the House for further consideration”, Oyula said.
Proposed law introduces cheap data
Aside, the finance bill seeks to amend the second schedule of the Income Tax Act to allow a tax deduction at the rate of 10% per year on capital expenditure incurred by telecommunications operators on acquisition of spectrum licenses.
“One of the key proposal contents in the Finance Bill 2024 is around investment allowance or you can call it capital allowance on spectrum license.
The amendment will lead to a lower cost of providing telecommunication services in the country, and more so the 5G technology and other future advanced technologies,” a tax expert said.
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