Nyeri Catholic Archbishop Anthony Muheria has called on the government to review the Financial Bill, 2024.
According to the bishop, the bill if passed in its current form will cause untold suffering to Kenyans.
Muheria in a statement opposed the proposed VAT on common bread which the bill proposes to reclassify supply of bread from zero rated (0% VAT) to standard rated (16%).
“Bread is a staple food for the common and adopting the proposed tax will impact negatively on the under-privileged especially those who struggle to have one meal a day. Thus, on moral grounds it is difficult to justify the tax,” part of the statement read.
According to Muheria, it is not the right time to impose directly or indirectly any form of taxation as proposed in the Bill to impose VAT on bread and excise duty ion edible oil.
“At present, the oils are not subjected to duties but effective 1 July 2024, the Bill proposes to levy 25% on vegetable oil which is a necessity that is hardly affordable by most households,” he said.
Muheria added that the government has not provided any sound legal or economic justification for the imposition on the proposal to impose a 2.5% Motor vehicle circulation tax.
“How is it a tax on income? Vehicle owners suffer taxation from the moment of purchasing the vehicle 9import duty, excise duty, VAT and other import levies), running the vehicle – fuel attracts a plethora of taxes and levies, repairs and maintenance, etc.”
Muheria also noted that the Bill proposes to levy VAT at 16% on financial instruments and transactions.
According to Muheria, this will render most of these products unviable and reverse the gains made in mobilization and intermediation of savings and financial sector deepening.
“Traders and the quasi-formal sector are likely to resort to cash transactions in order to lower costs thereby eroding the significant financial intermediation gains realized to date,” he added.
The Bill also proposes a levy of 10% of customs value on manufacturing inputs such as billets and cement clinker.
At the same time, the Bill allows import of finished products such as iron bars at a levy of 17.5% of custom value.
According to Muheria, some manufacturers are likely to stop production and shift to imports of finished goods while others are likely to shut.
Muheria also faulted the timing of the Bill proposal of Multinationals minimum top-up tax of 15% which applies to resident persons or non-resident entities with a permanent establishment in Kenya that are part of multinational group with a consolidated annual turnover of EUR 750 million (approximately KES 108 billion) in at least two of the previous four years preceding the first year of income.
“If it is not addressed at the same time by all the countries in the region including South Africa and Egypt, the major companies will avoid investment in Kenya and instead use independent distributors for distribution of their imported products to Kenya,” Muheria noted adding that this will negatively impact on industrialization.
