Finance Bill 2023: What You Should Know About Major Changes in Tax Proposals
The National Treasury submitted the bill to parliament, which is currently under public participation, for approval in June 2023. The bill seeks to raise tax revenue to fund President William Ruto's administration's first budget pegged at KSh 3.64 trillion. The new proposals, which take effect on July 1 after National Assembly's approval, come with a raft of measures to increase revenue collection by KRA.
Major changes in Finance Bill 2023 According to Deloitte East Africa Tax and Legal Senior Manager Fredrick Kimotho, the changes to the tax revenue are many but major ones revolve around Value Added Tax (VAT), excise duty, turnover tax and income tax.
Kimotho highlighted the following key changes in the tax rates as proposed in the Finance Bill 2023;
The bill proposed to increase the VAT rate on petroleum products from 8% to 16%, which is expected to increase the fuel cost further.
The excise duty rate on mobile money transfer fees is set to increase from 12.5% to 15%, projecting an increase in the cost of transferring money.
Small businesses earning KSh 500,000 per year will have to pay a turnover tax of 3%, up from 1%.
The minimum threshold of the income subject to turnover tax has been reduced from KSh 1 million to KSh 500,000, capturing many SMEs.
Salaried employees’ pay, already ravaged by inflation, is expected to shrink further as the government proposed to increase the top income tax rate to 35% from 30% for workers earning above KSh 500,000.
The bill also proposed payment of a withholding tax rate of 15% on digital content monetization.