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    HomeEcosystem NewsEASTERN AFRICAUPDATE: Kenyan Parliament Defies Protesters, Approves 16% VAT Increase in Finance Bill

    UPDATE: Kenyan Parliament Defies Protesters, Approves 16% VAT Increase in Finance Bill

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    On Tuesday, parliament in Kenya passed the 2024 Finance Bill, despite widespread opposition from thousands of Kenyans. This decision came just four days after the bill was sent to the committee stage for deliberation. The bill saw 195 MPs voting in favor, 104 against, with 3 void votes. The legislation has faced significant criticism for introducing a new series of tax proposals, marking the second such increase in two years, amidst a rising cost of living in the country. OccupyParliament protesters in Nairobi urged lawmakers to reject the proposals, while a larger wave of opposition spread across social media platforms, including X and TikTok.

    The proposed 16% Value Added Tax (VAT) on financial services, contained in the Finance Bill, has drawn particular criticism from various quarters, including the Kenya Bankers Association (KBA), which argues that this move would disproportionately burden low-income earners and small businesses. The KBA also warns that the tax could stifle economic growth by making Kenyan exports less competitive and hindering investments in key sectors like tourism.

    The Finance Bill has ignited widespread public discontent, with thousands of Kenyans, led by young activists, taking to the streets in major cities to protest the proposed tax hikes. Demonstrators have voiced concerns about the rising cost of living and the government’s economic policies.

    Despite some concessions made by the government, such as rolling back proposed levies on bread, car ownership, and mobile services, many protesters remain dissatisfied. Critics argue that the government’s alternative revenue-raising measures, including increased fuel prices and export taxes, will still burden ordinary citizens.

    The proposed tax changes outlined in the bill include:

    • A 20% tax on income earned by non-residents and a 5% tax for residents operating or owning digital marketplaces or facilitating digital content monetization.
    • The removal of VAT exemptions for betting, gaming, and lottery services, bringing them under the standard 16% VAT bracket.
    • The replacement of the Digital Service Tax (DST) with a Significant Economic Presence Tax (SEPT) levied at a rate of 30% on the deemed taxable profits of non-resident companies offering services through a digital marketplace in Kenya.
    • The removal of VAT exemptions for various financial services, including credit and debit card issuance, telegraphic money transfers, foreign exchange transactions, cheque handling and processing, issuing financial securities, assigning debt for a fee, and providing financial services for a commission.

    The Kenya Bankers Association has called for dialogue with the government and parliament to explore alternative revenue-raising measures that would not harm the banking sector or its customers. The association has expressed its willingness to collaborate on finding solutions that promote economic growth and financial stability.

    The Finance Bill 2024 remains a contentious issue in Kenya, with the potential to significantly impact the country’s economic landscape. As the bill moves to the committee stage, the debate continues, and Kenyans eagerly await the final outcome.

    Additional Information:

    • The government claims that the proposed tax hikes are necessary to fill its coffers and reduce reliance on external borrowing.
    • The protests have been largely peaceful, but there have been isolated clashes with police in Nairobi.
    • The Kenyan economy is facing high inflation and a cost-of-living crisis.

    Launch Base Africa will continue to monitor the situation and provide updates as the Finance Bill 2024 progresses through to the President for assent.

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