Kenya Finance Bill 2024: Implications on SMEs
Kenya's proposed Finance Bill 2024 is out and it contains a raft of new taxes as well as amendments to some tax acts that will greatly impact the Small and Medium Businesses, if passed. CNBC Africa is joined by Victor Otieno, Managing Director at Viffa Consult.
Fri, 31 May 2024 15:13:28 GMT
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AI Generated Summary
- The proposed Finance Bill 2024 introduces new taxes and amendments to existing tax laws that will significantly affect SMEs in Kenya, with potential increases in operational costs and compliance challenges.
- The expansion of the digital marketplace definition offers clarity to SMEs on tax obligations, but taxes like motor vehicle tax and eco-heavy levies could strain SMEs financially.
- The government's emphasis on e-Tims integration poses challenges for small traders, with potential significant penalties that may be unsustainable for many SMEs. Victor Otieno emphasizes the need for a supportive policy framework to help SMEs overcome hurdles and suggests investing in high-return sectors to stimulate economic growth.
Kenya's proposed Finance Bill 2024 has sent shockwaves through the business community, particularly impacting Small and Medium Enterprises (SMEs) in the country. The bill, if passed, will introduce a series of new taxes and amendments to existing tax laws that will have significant repercussions on SMEs. Victor Otieno, Managing Director at Viffa Consult, shared insights on the implications of the bill in a recent interview with CNBC Africa. The proposed tax measures are expected to affect SMEs in various ways, from increased operational costs to compliance challenges and potential penalties. One of the key highlights of the bill is the expansion of the definition of digital marketplace, providing clarity to SMEs on their tax obligations. However, the introduction of taxes such as the motor vehicle tax and eco-heavy levies is likely to burden SMEs financially. Additionally, the imposition of excess duty on broadband services could lead to a 30 percent increase in internet provision costs, adding to the financial strain on SMEs. The government's emphasis on e-Tims integration for businesses poses a challenge to small traders, with non-compliance risking hefty penalties of up to two million shillings per month. Given that a significant portion of Kenya's economy operates informally, with many SMEs having limited turnovers, the proposed penalties may not be sustainable for small businesses. Victor emphasized the need for a more supportive policy framework to help SMEs thrive, suggesting interventions to address challenges such as access to markets, finance, and capacity building. While the government aims to boost revenue collection through tax measures, balancing the need for revenue generation with business sustainability remains a critical issue. Victor highlighted the importance of investing revenue in high-return sectors like agriculture, transport, and ICT to stimulate economic growth and reduce fiscal deficits. The debate surrounding Kenya's Finance Bill 2024 underscores the delicate balance between revenue generation and supporting SMEs' growth in the country. As the business community awaits the outcome of the bill, stakeholders are closely monitoring the potential impact on SMEs and the broader economy.
