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Kenya Budget 2024

Finance Bill amendments: Concessions or diversions?

by Netty Nyong’a

As the Finance Bill 2024 (“The Bill”) staggers through its final stages of deliberation and onto its seemingly imminent ascent into law on or before the 30th of June 2024, the Departmental Committee on Finance and National Planning (“The Committee”) tabled their report (“The Report”) outlining the input received during the recently concluded public participation exercise, their consideration of it and their subsequent recommendations. 

Amid already -risen tensions, the recommendations featured in the Report seemed to offer some much-needed respite from the all-but unconscionable proposals in the Bill. Nonetheless, there is still much debate as to the actual intentions underlying the amendments contained in the Report, and whether they align to the ultimate goal – fostering sustainable economic growth and social welfare of Kenyans. 

From an analysis of the Report, one may note that the concessions made on the part of the Committee largely reflect the pleas of taxpayers, addressing the most tender pressure-points for the ‘common mwananchi’. However, a keener look into the balance attempting to be struck reveals a more distorted picture. 

By way of example, the proposed motor vehicle tax capped at KES 100,000 was deemed discriminatory due to the unfair advantage dealt to owners of higher-end motor vehicles as well as its adverse effects on the insurance sector. Commercial vehicles already subject to advance tax would suffer double taxation. Worse still, the tax’s nature, computation and operational framework could hardly be explained coherently, exacerbating the optics around the tax. 

The recommendation to delete this proposal therefore gave rise to a collective sigh of relief from taxpayers. However, with intense focus on the KES 58 billion that had been projected to be generated from this tax, could taxpayers be forced to hold their breath again when considering the alternative to the motor vehicle tax?

The Report recommended a new clause 66 to be included in the “Miscellaneous” section of the Bill, which seeks to introduce an increase in the Road Maintenance Levy (“RML”) rate from KES 18 per litre to KES 25 per litre on all petroleum fuels. The rationale cited in the Report touches on the dwindled RML collections in the fiscal year 2023/24 owing to high fuel prices and depreciation of the Kenya Shilling. The need for an increase in the rate on this Levy is also confessed to have been exacerbated by the destructive effects of the el nino on roads earlier this year. 

Currently, petroleum fuels already attract quite a number of taxes and levies among which are Excise Duty, VAT, RML, Petroleum Development Levy (“PDL”), Railway Development Levy (“RDL”) among other costs separately imposed by dealers. For instance, on the current KES 192.84 cost per litre of super petroleum, these taxes and levies constitute a whopping 38.1% of the fuel price.  High fuel prices have an all-encompassing impact on the Kenyan economy, as they ultimately result in increased transportation and production costs, which in turn drive up the prices of goods and services. 

Upon careful consideration of the RML as the offered alternative to the motor vehicle tax, can one truly arrive at the conclusion that the proposed recommendation has rendered taxpayers better-off?

Moving on to the equally popular proposal to impose VAT at 16% on bread, the Report has recommended a withdrawal of the proposal from the Bill and retention of bread at the zero rate, citing the staple nature of bread in the ordinary Kenyan household. The same treatment has been recommended on the taxation of agricultural and pest control products as well as the supply of locally manufactured mobile phones in a bid to foster economic growth in these sectors.

The Committee further proposed VAT exemptions on the issuing of credit and debit cards, foreign exchange transactions, sanitary towels and diapers. We see the same treatment across the board with regard to Excise Duty, where the prevailing rates of 15% on telephone and internet data services as well as money transfer services are to be retained, much to taxpayers’ satisfaction. 

Conversely, paragraph 162 of the Budget Statement, 2024 as read on the 13th of June expresses the intent to reformulate the criteria for determination of VAT rates on the basis of the Medium-Term Revenue Strategy (“MTRS”) and an attempt to rationalize tax expenditure. The intended criteria envision all finished goods currently exempt being subject to VAT, zero rated finished goods being exempt and zero rating being restricted to goods and services meant for export. In light of this, it remains to be ascertained whether the VAT exemptions recommended in the Report are merely a mechanism to placate the common mwananchi before a more rigid transition to the proposed criteria in the next fiscal year(s).

On the contrary, the Report cites a proposal to further increase employees’ tax-deductible meal benefit from the proposed KES 48,000 in the Bill to KES 60,000, which has garnered favor among taxpayers. Yet again, however, it seems this amendment is paired with another. The Report recommends the deletion of the proposal in the Bill to introduce a non-taxable per diem amount of 5% of an employee’s monthly gross income and retain the current per diem flat rate of KES 2,000 per day.

Considering the impact of inflation on a rate which has been in place for over 20 years, the purchasing power of KES 2,000 as relates to travel, accommodation and subsistence and the disparity between this rate and those provided by the Salaries and Remuneration Commission (“SRC”) for public servants which currently range from a minimum of KES 3,000 to a maximum of KES 22,000, it seems that another major trade-off has been made at the expense of the common mwananchi on the basis that “…the current provision in the Act is sufficient.”

In light of the comparisons herein analyzed, it only remains to be seen whether these recommendations constitute an act of giving with one hand and taking with the other. 

Netty Nyong’a is a Tax Associate at Deloitte East Africa. The views presented are her own and not necessarily those of Deloitte. She can be reached at

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