Stakeholders have expressed significant concerns over the proposed Tax Laws and Business Laws (Amendment) Bill, citing unclear implementation timelines and potential socioeconomic burdens on Kenyans. These issues were raised during submissions to the Finance Committee of the National Assembly on Wednesday, November 27.
Key Concerns Raised
1. Ambiguity in Commencement Dates
The Institute of Certified Public Accountants of Kenya (ICPAK) called on the National Treasury to specify the effective dates of the proposed tax measures. They emphasized that clear timelines are essential to prevent compliance-related disputes and ensure a smooth adoption process for taxpayers and the Kenya Revenue Authority (KRA).
2. Increase in Excise Duty on Internet and Telephone Services
ICPAK criticized the proposed hike in excise duty on telephone and internet services from 15% to 20%, arguing that:
- It would raise communication costs, thereby straining businesses and affecting content creation, a critical source of income for many youth.
- The higher costs could discourage digital engagement at a time when the government is promoting a digital economy.
“With dwindling employment opportunities, why increase taxes on areas where young people are earning?” ICPAK questioned.
3. Withholding Tax on Digital Marketplace Owners
The bill proposes withholding taxes of:
- 5% on resident digital marketplace owners.
- 20% on non-residents.
Digital traders warned that these measures could deter vendors from engaging in e-commerce, undermining the government’s efforts to increase revenue through digital trade.
4. Penalty for Failure to Withhold or Remit Tax
The Law Society of Kenya (LSK) raised concerns over the provision imposing a 10% penalty for failure to:
- Withhold tax.
- Remit the withheld tax by the fifth working day after deduction.
The LSK pointed out that:
- The bill fails to define what constitutes “reasonable cause” for non-compliance.
- The lack of clarity could lead to ambiguous enforcement and disputes between taxpayers and KRA.
Recommendations from Stakeholders
- Define “reasonable cause” for non-compliance to provide clear guidelines for taxpayers.
- Reconsider the excise duty increase on communication services to protect young entrepreneurs and digital content creators.
- Provide clear implementation dates for all proposed tax measures to avoid ambiguity.
- Reassess withholding tax on digital traders to encourage the growth of e-commerce and avoid revenue loss.
Broader Implications
The stakeholders argued that while the bill aims to enhance revenue collection, some provisions could:
- Discourage investment and digital trade.
- Impose additional financial burdens on vulnerable populations, especially youth and small businesses.
The National Assembly is expected to review these submissions and deliberate on possible amendments to address the raised concerns before the bill is enacted.
