The government has defended the proposed legislative amendments on taxation saying Kenyans stand to reap benefits once enacted.
Government Spokesperson Isaac Mwaura said on Monday the proposed tax reforms are aimed at fostering sustainable growth while ensuring Kenyans’ quality of life improves without disproportionately overburdening them.
Tax Laws (Amendment Bill) 2024 and the Tax Procedures (Amendment Bill) 2024 are among several existing laws the National Treasury seeks to amend to address growing fiscal demands and ensure efficient revenue collection.
“These bills were subjected to extensive public participation, giving Kenyans a platform to express their views and propose recommendations,” Mwaura said.
The proposed amendments intend to, among other measures, expand the digital tax base by taxing services such as taxi-hailing, food delivery, freelance and other digital professional services under a new tax known as digital marketplace.
This is expected to hike the cost of travel and food but Mwaura reckons that the move will help grow the country’s digital economy.
“This move is essential in ensuring that digital service providers fairly contribute to the economy,” he said.
Additionally, the government spokesman said Significant Economic Presence Tax will be levied on income derived from services provided by non-resident entities operating in Kenya's digital marketplace.
“This ensures that foreign digital businesses contribute at fair rates and aligns Kenya's tax system with global best practices,” he said.
Mwaura further said Kenyan employees and businesses will stand to derive improved benefits seeing that the amendments propose to raise non-taxable benefits, making allowances for meals, non-cash benefits and gratuity more favourable for workers.
This, he said, will positively impact employees' disposable incomes.
He said enhanced deductions for registered pension or retirement contributions will also benefit both individuals and employers and allow them to save more effectively for the future.
“Contributions to the Social Health Insurance Fund and Affordable Housing schemes are now deductible, aimed at increasing the take-home pay for Kenyan workers while promoting health and housing goals,” Mwaura said.
He said since the shift from NHIF to Social Health Authority on October 1, over 14 million Kenyans have registered under the new restructured health insurance system, offering them improved access to healthcare.
“In public hospitals across counties, including Makueni, Nakuru and Kisumu, as well as at major maternal hospitals in Nairobi, such as Pumwani and Mama Lucy, patients and healthcare providers are witnessing the positive impact of SHA's support. Individuals with chronic conditions like cancer, diabetes and kidney disease are now able to receive free treatment at SHA-compliant facilities, alleviating financial burdens and enhancing quality of life,” Mwaura said.
He said no Kenyan is being asked to foot their hospital bills out of pocket and called on private healthcare facilities to join the initiative by registering with SHA.
Other benefits of the proposed tax amendments, Mwaura said, is enhanced county government funding where the devolved units will be able to receive monies from the national government even in cases where the Division of Revenue and County Allocation Bills are delayed.
This, Mwaura said, will avert incidences of disrupted service delivery in counties as has been the case in the absence of mechanisms to address such hiccups.
He added that amendments proposed by the Ministry of Trade, Investment and Industry further seek to promote fair and competitive business environments by enhancing the ease of doing business, attracting investments and improving export performance.
“This involves adjustments to the Investment Promotion Act, which will streamline foreign investment registration and support Kenyan businesses,” Mwaura said.
He said the law changes will also support the local manufacturing industry and procurement via the Public Procurement and Asset Disposal Act amendments.
The proposed law mandates that at least 40 per cent of goods and services procured by the government must come from local manufacturers.
This, Mwaura said, will spur economic growth, job creation and support Kenya's local resources.
“These amendments are part of a larger plan to stabilise the Kenyan economy. Our debt currently stands at 68 per cent of GDP, down from 73 per cent. By increasing local revenue through fair tax reforms, we aim to reduce reliance on foreign debt, align with global best practices and secure financial stability for future generations,” Mwaura said.
He said the government pledges to use public resources efficiently and transparently considering new policies are mow in place to promote effective governance.
“Kenyans can expect enhanced service delivery, particularly in sectors such as health, housing, and education. This commitment underscores the government's dedication to building public trust and ensuring that all tax revenues are directed toward uplifting Kenyans,” he said.
