ICPAK
Accountants led by the Chairperson of the Institute of Public Accountants of Kenya, Phillip Kakai have expressed significant concerns regarding the proposed Finance Bill 2024 tabled in Parliament on May 9th.
They have opposed the move by the state to increase tax on bread, motor vehicles, banking, and insurance services. They argue that these tax hikes will increase the financial strain on already burdened citizens, potentially hindering economic growth and increasing the cost of living.
The Institute of Certified Public Accountants of Kenya (ICPAK) urges the government to reconsider these measures and seek alternative solutions that do not further impact the public. Kakai said that the institute is concerned about the inconsistency in the proposals in the Finance Bill, 2024, the National Tax Policy, and the Medium-Term Revenue Strategy provisions that enable predictability and stability in tax laws.
While addressing the press during ICPAK 41st annual seminar in Mombasa that brought together over 3500 accountants from East Africa, Kakai said the Institute is ready and committed to supporting the National Assembly to enhance scrutiny of the proposals as well as ensure proper implementation thereafter.
a section of Accountants in attendance at the ICPACK 41st Annual Meeting held at Sarova Whitesands, Mombasa.
“The Institute has been invited and will be making detailed submissions to the National Assembly on these and other proposals on May 28, 2024,” said Kakai. He said that the tax policy anticipated an environment where tax laws will be introduced to last for five years, yet some of the provisions introduced and passed in the Finance Act, of 2023 are already being amended.
“These frequent changes go against the canon of stability and predictability in taxation. Further, the Medium-Term Revenue Strategy provided a policy direction that anticipated a percentage reduction of the VAT rate,” said Kakai. The Chair said that the Finance Bill 2024 proposal to reclassify the supply of ordinary bread from zero-rated to standard-rated will increase the price of bread which is a staple food for most Kenyans.
He pointed out that globally, the demand for baked products has been on the rise and that the demand is even expected to grow by 13 percent by 2025 for a variety of bakes. “The Institute believes that the government should retain bread and other related wheat products as zero-rated to make them affordable to the majority of Kenyans who’re still grappling with the high cost of living,” said Kakai.
He said the draft Finance Bill proposal to introduce a motor vehicle tax of 2.5 percent of the value of the motor vehicle will affect the transport and logistics industry which may opt to pass through the additional cost to their customers thus escalating the cost of living.
Kakai said the proposal comes against the backdrop of revised insurance premium rates and high fuel prices, inevitably shoring up the cost of operating motor vehicles in Kenya. “It is also important to note that the motor vehicle tax, unlike advance tax on commercial vehicles, cannot be offset against income tax payable,” said Kakai.
The chair said the proposes to increase in Excise Duty from 15 percent to 20 percent on telephone and internet data services, fees charged for money transfer services by banks, money transfer agencies and other financial services and fees charged for transfer services by cellular phone may lead to a decrease in the number of transactions thus may see a decrease in the Excise Duty collection.
However, the Chair said the Institute supports the Introduction of minimum top-up tax to align with the international tax regime. He said they also support the Pension Contribution limit that has been increased to Sh30,000 per month from Sh20,000.
“Unlike before, the Contributions paid for the Affordable Housing Levy and SHIF are set to be an allowable deduction and not treated as a relief. The transfer of business as a growing concern is now VAT Exempt implying that transfer of businesses will be less costly,” said Kakai
The Institute of Certified Public Accountants of Kenya (ICPAK) is a statutory body of accountants established under the Accountants Act and mandated to develop and regulate the Accountancy Profession in Kenya and advise the Cabinet Secretary on matters relating to financial accountability in all sectors of the economy.