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Finance Act 2024 will contain crystal clear provisions, Committee assures KBA

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The Finance Act 2024 will have crystal clear provisions devoid of ambiguity, the National Assembly Committee on Finance and National Planning has assured.

The Committee led by its Chairperson Kuria Kimani made the pledge on Wednesday during a breakfast engagement with the representatives of the banking sector, under the auspices of the Kenya Bankers Association (KBA).

Kuria acknowledged that failure by the Finance Act 2023, to provide specific monthly dates by when entities should have remitted their tax payments to the Kenya Revenue Authority, may have resulted to increased cost of tax compliance.

The MP was responding to assertions by FCPA Edna Gitachu-a tax policy consultant for KBA, that the Act’s provision that requires entities to pay taxes within 5 working days had resulted to 1300% increase in number of tax payments per year, leading to huge costs on tax administration.

“Hon. Members, preliminary analysis in our ongoing Total Tax Contribution Report indicates that the average number of tax payments in 2023 for 16 of our respondents is 775, three times the works average. The same analysis shows that banks spent Ksh1.18 million in additional costs for hiring staff for tax compliance in 2023,” noted Gitachu.

Additionally, KBA’s Chief Finance Officer Kennedy Mutisya expressed concerns that the newly introduced Housing Levy and the Social Health Insurance Fund scheduled to be rolled out in July 2024, was in conflict with the Employment law and other laws and had led to decimation of disposal incomes.

He told the Committee that increase in contributions had an effect on net pay and was potentially in breach of the one-third rule in the Employment Act.

However, Kimani attributed the introduction of new taxes in the last Finance Act to high budgetary demands by all sectors in government.

He further observed that it was time for the county to consider managing its expenditure within a realistic budget.

At the same time, the Committee has committed that beginning next financial year, they will hold regular engagements with players from various sectors of the Economy after every passage of the Finance Act, to audit the impact of the legislation on the economy.

“We are delighted for the opportunity to undertake a mid-term review on the impact of the Finance Act, 2023. We however should not wait until the tail end of the implementation of the Act to share such insights. We want to make a pledge that going forward, we shall engage regularly, so that by the time we’re considering the Finance Bill, we have projected on the provisions that require to be amended”, he explained.

Meanwhile, the Committee has cautioned government agencies that are yet to comply with the government directive thar all transactions be captured through e-TIMs. Speaking on the matter, Hon. Kuria said that the Committee would seek an explanation as to why some government agencies had failed to comply.

“The requirement that all entities onboard on e-TIMs has afforded the government an opportunity to expand the tax base and consequently, generate more revenue. We can therefore not understand why some government parastatals are yet to comply. They should lead by example,” he stated.

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