Kenya’s Finance Bill 2023: Wins & losses for ordinary taxpayers

In Kenya, the Finance Bill 2023 has sparked intense debate and speculation among taxpayers, business associations, and government officials. The bill, which consists of 89 sections proposing various changes across different legislations, aims to broaden and deepen the tax space in order to increase domestic revenue collection. Edna Gitachu, Tax Policy Lead at PwC Kenya, highlighted some key aspects of the bill during a recent interview with CNBC Africa. One of the significant changes is the introduction of withholding tax at the rate of 15% for digital content creators, a move aimed at bringing more taxpayers into the tax net. Additionally, a new digital asset tax covering non-fungible tokens and cryptocurrency will be implemented at a 3% rate. Moreover, the capital gains tax rate has been increased from 5% to 15%, with non-residents owning shares in Kenyan companies indirectly also now subject to tax in Kenya. On the flip side, existing taxpayers will face higher tax rates, such as a rise in the tax rate for money transfer services from 12% to 15%, while pay as you earn the top marginal rate will go up from 30% to 35% for employees earning over 600, 500,000. The turnover tax rate is set to increase from 1% to 3%, and VAT on petroleum products may jump from 8% to 16%. In terms of cash flow management, the bill proposes faster tax payments, reducing the time frame from up to 20 days to as little as 24 hours in some cases. Taxpayers involved in disputes will also be required to pay at least 20% of the disputed tax amount or provide security of a similar amount when appealing at the high court level. This move, though reduced from the initial 50%, still poses challenges for taxpayers seeking justice. President William Ruto's aim to reinstate fuel tax, previously exempted by his predecessor, raises concerns about the impact on taxpayers, especially given the high cost of living. As the government looks to address debts from previous administrations, there are growing concerns about the burden being placed on taxpayers. The public participation stage will provide an opportunity for the public to voice their opinions and potentially influence which proposals are adopted. Gradual implementation of the proposed changes may be more manageable for taxpayers, allowing for a smoother transition and adjustment to the new tax regime.