Months after thousands of Kenyans protested the defunct Finance Bill 2024, the government is once again proposing a series of tax measures aimed at reducing a budget deficit currently at Ksh500 billion.
The proposed Tax Laws Amendment Bill, drafted by the National Treasury and introduced in the National Assembly by Majority Leader Kimani Ichung’wah, includes a new tax on both local and foreign investors purchasing infrastructure bonds. Specifically, the bill suggests a 5% tax on interest earned by investors in these bonds, which are government securities issued as debt through the Central Bank of Kenya (CBK).
Additional proposed changes include an increase in excise duty on imported sugar, raising the rate from Ksh5 to Ksh7.50 per kilogram. Exemptions would apply to sugar imported by registered manufacturers and raw sugar intended for processing by licensed sugar refineries.
In another significant amendment, excise duty will be applied to imported electric transformers and certain vehicle parts at a rate of 25%, while imported printing ink would face a 15% excise duty, excluding ink from East African Community (EAC) partner states that comply with EAC Rules of Origin.
The administration under President Ruto also proposes a 16% tax on aeroplanes, helicopters, spacecraft, and specific locally assembled vehicles used for tourism. Additionally, a 15% excise duty would apply to internet and social media fees.
Tax Exemptions
Despite the tax hikes, the bill includes several exemptions. Locally assembled electric vehicles would be excused from excise duty to promote local manufacturing and job creation. Pension payments, gratuities, and other benefits from registered pension funds, such as the National Social Security Fund (NSSF), would also be exempt from income tax.
Non-resident contractors, subcontractors, consultants, or employees working on projects financed by full grants would be exempt from income tax. Goods used in manufacturing baby diapers, sanitary products, certain fertilizers, and agricultural pest control products would also be exempt from taxation if the bill passes in Parliament.
