2018/2019 Budget: Highlights of the new tax measures

Mobile money service providers are set to pay higher taxes in the coming financial year if a proposal by Treasury Cabinet Secretary Henry Rotich in the Ksh3.074 Trillion 2018/2019 budget is approved.

CS Rotich, while reading the budget in Parliament, proposed to increase excise duty on mobile money transfer services from 10% to 12% and have the amount collected channeled towards funding the government’s universal healthcare programme.

The Treasury CS also proposed a tax of 0.05 % on cash transfers of more than Ksh.500,000 between banks and other financial institutions.

“Our economy has a well established financial sector in the region with significant sums of money transferred monthly. In order for the government to get a fair share of revenue from these financial activities and to finance critical government programmes I propose to introduce a robin hood tax of 0.05% of any amount of ksh500,00 or more transferred through banks and other financial institutions,” said Rotich.

“The revenue realised from these measures shall be used to fund universal healthcare.”

The 2018/2019 budget of Ksh3.074 Trillion has grown by about 10.83 percent from the 2017/18 financial year which was Ksh2.77 Trillion.

Those planning to import private vehicles exceeding a fuel capacity of 2500cc should also brace themselves for higher taxes. CS Rotich has proposed to increase the excise duty from 20% to 30% for motor vehicles whose capacity exceeds 2500cc for diesel and 3000 cc for petrol powered vehicles.

Excise duty of Ksh.20 per Kg is also set to be imposed on sugar confectionaries and chocolates.

The government has also suspended a plan to impose a flat 35 % income tax rate to those earning a salary above Ksh.750,000 per month after public uproar.

To deter taxpayers from late payment of filing tax returns, CS Rotich proposed to amend the Tax Procedure Act to increase the rate of late payment interest to 2% and also introduce a 20% rate penalty.

Companies in the betting, lottery and gaming sector will also be forced to pay a 20%  penalty and 2% interest for delay in payment of taxes.

“This will enhance the collection of these taxes that are meant to support sports, arts, cultural and social development activities in our country,” said Rotich.

To protect local manufacturers and industries from competition from cheap and subsidized imports, encourage local production and create jobs for our youth the CS has taken the following measures:

1.Increased Import duty from 25% to 35% on iron and steel products and paper and paper board produced in the region.

2. Introduced a specific rate of import duty of USD5 per unit or 35% whichever is higher, on textile and footwear.

3. Introduced specific rate duty of USD110/metric tonne (MT) on particle board, USD120/MT on medium density fiber board, USD230/cubic metre on plywood and USD200/MT on block boards, or 35% whichever is higher.

4. Introduced a specific rate of USD 500/MT or 35% whichever is higher on vegetable oils.

5. Remission of duty on inputs and raw materials for the manufacture of pesticides and acaricides.

6. Remission of duty on motor cars, sightseeing buses and overland trucks imported by licensed tour operators.

7. Remission of duty on taxable inputs and raw materials for assembly of clean energy cooking stoves imported by locally.

The Treasury also proposed exemption of Value Added Tax on parts imported or purchased locally for the assembly of computers to encourage local manufacture, innovation and job creation.

Also exempted from VAT is equipment to be used in the construction of grain storage facilities to support safe storage of food as well as raw materials for animal feeds. This is a bid to make animal feeds affordable to farmers and attract investors.