THE FINANCIAL BILL, 2023

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  • Taxing civil servants.
  • Plans for affordable housing.
  • Lowering the price of cooking gas.
  • Reducing prices of Unga.

The Finance Bill, 2023 has proposed a raft of interventions to cushion small businesses, National
Assembly Majority leader Kimani Ichungwah has said. He said that the Kenya Kwanza
government has included hustler-friendly measures that will break the taxman and provide a
business-friendly regime. He added that, The Finance Bill, 2023 is seeking to amend the laws
relating to various taxes and duties and provide for matters incidental thereto. Some of the Bills
he mentioned are;
Plans to lower the cost of living

The Finance Bill, 2023 has several specific proposals which seek to lower the cost of living for
all Kenyans, through affordable housing, promotion of agriculture by lowering the cost of
fertilizer, lowering the price of cooking gas, and implication of rent for tenants.

President Ruto’s plans to deliver Affordable housing

‘The requirement for new urban housing is estimated at 250,000 units a year, against
the production of 50,000 units, translating to a deficit of 200,000 units, the Kenya Kwanza
manifesto reads; The cumulative deficit is estimated at two million units. As a result, more than
60 percent of urban Kenyans live in slums and other low-quality housing without adequate
sanitation, undermining their dignity and exposing them to health hazards. This is also a
reflection of the bias towards upper-income housing.’
The Bill provides that an employer shall pay the National Housing Development Fund
established under section 7 of the Housing Act, in respect of each employee the employer’s
contribution at three (3%) per centum of the employee’s monthly basic salary; and the
employee’s contribution at three (3%) per centum of the employee’s monthly basic salary. There
is a proviso that the sum of the employer and employee contributions shall not exceed five
thousand shillings a month
There has been a misconception that affordable housing levy is a tax yet it is not. The levy is a
savings plan deduction with benefits accruing to the employee. It will also enhance the national
saving plan.

Benefits for an employee

President William Ruto Affordable housing plan, President William Ruto. Image courtesy of Pulse Kenya News.

According to the Bill, some of the benefits of the affordable housing plan are through
Homeownership for employees who qualify for affordable housing the contributions by the
employee shall be used to finance the purchase of a home under the affordable housing scheme.
However, for employees who are not eligible for affordable housing, upon the expiry of seven
years from the date of the start of making the contributions, or after the attainment of retirement
age, whichever is earlier the employee may opt to transfer contributions to a retirement scheme
or convert to pension transfer contributions or benefits, to another registered person of their
choice, transfer contributions/benefits to a spouse or dependent children; or receive back all the
contributions made in cash hence a savings plan.

Lowered prices of UNGA

Unga Prices Government to lower unga prices. Image courtesy of Nairobi News.

Government to lower Unga Prices. Image courtesy of Nairobi News.
The Bill proposes to allow for the zero-rating of the supply of maize corn flour, cassava, wheat
or meslin flour, and maize flour containing cassava flour under the VAT Act. This shall allow
Kenyans to continue accessing Unga at affordable prices. Unga forms part of the staple food for
many households. This shall be done through;

promotion of Agriculture by lowering the cost of fertilizer

The Bill proposes to provide exemptions under the VAT Act for fertilizers and inputs or raw
materials locally purchased or imported by manufacturers of fertilizers. This shall lower the cost
of fertilizer which will in turn lower the cost of production for farmers. This shall promote
agriculture and enhance food security. The production of crops such as maize shall also lower the
cost of basic commodities in particular Unga.

Lowering the price of cooking Gas

The Bill proposes to exempt lowering the price of cooking gas from VAT. This shall lower the
costs of LPG and hence ensure that many households including Kenyans in informal settlements
have access to clean energy for cooking compared to currently where many Kenyans have no
access to LPG due to its high prices.

Cooking Gas Government unveils plans to reduce the cost of cooking gas. Image courtesy of Capital News

Implication on rent for Tenants

The Bill proposes the reduction of the applicable income tax rate on monthly rental Income from
ten percent (10%) to seven-point five percent (7.5%). The reduction shall have a trickle-down
effect on the cost of rent payable by tenants as the Bill has reduced the tax payable by landlords
for monthly rental income.
Cost of Medical Care:

The Bill proposes exemptions under the VAT Act for various medical products and taxable goods
for direct and exclusive use in the construction and equipping of specialized hospitals.
The Bill once enacted shall lower the cost of medical care by Kenyans, shall promote the
development of the health infrastructure, and ensure access to affordable health care by all
Kenyans.

Taxing of Civil servants

The Finance Bill 2023 comes at a time when KRA is keen to collect tax within 24 hours if not in
real-time. There are a couple of amendments in the Bill that will facilitate this such as the
codification of an electronic tax invoice management system and the requirement to account for
Withholding Tax within 24 hours.
We have a few surprises in the Bill including the proposal to tax digital assets such as
cryptocurrencies. The proposal for 35% tax on employees earning more than Kes 500,000 per
month and the proposal to deposit 20% of the disputed tax with KRA before appeal to the High
The court is debatable but not a surprise.

However, there have been some opposing statements from some leaders like Ann waiguru, Governor of Kirinyaga County who said that over-taxation is a burden and affects the employees. She said that Kenyans are underpaid and therefore trying to justify the addition of any taxable component is unfair and insensitive. “over-taxation is not just about several taxable components but largely on the burden and the affects on the employees. kenyans are underpaid and therefore trying to justify the addition of any taxable component is unfair and insensitive. The current income for the majority of Kenyans can barely serve their needs. The housing levy by the Kenya Kwanza government which I am part of is a rip-off and a pyramid scheme well designed by the president and his men to steal from poor Kenyans and I will mobilize our Mount Kenya MPs to oppose it in the parliament. We cannot oppress and burden Wanjiku just to serve the interests of a few oligarchs. I will not deduct the 3%from my county employees and I want to appeal to my colleagues in the governors” council not to betray their people. Kenya is not a charity state where the few working have to contribute to build houses for drunks idlers and the lazy,” she said.

Ann Waiguru Ann Waiguru warns non-compliants on over-taxation. Image courtesy of Kenya News Agency.

Tax reliefs to retirees on post-retirement medical schemes

The Bill proposes to provide tax relief to persons who contribute to post-retirement medical
funds. This is to encourage retirees to enroll in post-retirement medical schemes hence
guaranteeing their access to medical care postretirement.

Plans in the Financial Bill, 2023 to protect local businesses, boost the manufacturing sector, and create employment opportunities for the youth

The Bill has several proposals which seek to protect and promote local businesses, boost our
the manufacturing sector, and create employment opportunities for the youth. Some of them are;
Promotion of local business and the creation of jobs, the Promotion of the manufacturing sector,
the Promotion of the Jua Kali sector, and the Promotion of the local fishing sector
For the promotion of local business and the creation of jobs, The Bill proposes to impose
additional levies on imported products such as steel, paper, plastics, and paints among other
goods. This shall protect local manufacturers from unfair competition and further protect the job market created by local businesses.
In the promotion of the manufacturing sector, The Bill proposes to provide for export and
investment promotion levy, on all goods specified in the Third Schedule of the Miscellaneous
Fees and Levies Act, 2016 imported into the country for home use. The purpose of the levy shall
be to provide funds to boost manufacturing, increase exports, create jobs, and save on foreign
exchange, and promote investments.

The Bill also seeks to impose excise duty for imported furniture excluding furniture from the
EAC. This shall protect and promote local production, including our jua kali sector engaged in
the manufacture of furniture to enhance the promotion of the Jua Kali sector.

Allocation for Fisheries in Financial Bill 2023. Image courtesy of Agricultural Post.

Finally, in the promotion of the local fishing sector, the Bill imposes excise duty on imported fish
and hence seeks to protect the local fishing industry which provides a source of living for many
Kenyans.
Other bills mentioned by Kimani Ichungwa are in conjunction with; Kenyan businesses to enjoy
VAT exemptions, reduction of import fees to spur businesses, local borrowing interest restrictions,
incentives for local content for motor vehicle assemblers, promotion of the tourism industry,
incentives for start-up businesses, ease of doing business, cushions Kenyans from the impromptu
increase in the cost of basic commodities, cushions Kenyans, and businesses from paying
unnecessary tax penalties, ease of tax obligations and tax refunds, and measures to increase tax collection to provide services.

{Article by Rodgers Mwangangi and Abisai Maloba}

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