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New Ruto taxes for schools, cars, and alcohol

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New Ruto taxes for schools, cars, and alcohol

Despite massive public outrage following the passage of the 2023 Finance Act, which imposed more taxes to an already heavily taxed population, it appears that the government will continue to impose new financial burdens on Kenyan citizens in order to fund its development goals.

The government is currently soliciting public feedback on its medium-term income strategy for fiscal years 2024-2025 and 2026-2027, with a deadline of October 6 for Kenyans to offer feedback.

The revenue strategy advises reviewing the VAT rate to align it with those of other East African Community (EAC) member states, which is 18 percent, in order to create a consistent tax system. This shift, if enacted, will result in higher pricing for all manufactured goods, including consumer goods.

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Other recommendations include eliminating VAT exclusions and zero-rating products, as well as reinstituting a minimum tax regime to prevent corporate and other entity tax cheating.

There is also a proposal to impose VAT on services offered by institutions that are not directly related to education, which could have an impact on extracurricular activities, despite the fact that the Competency-Based Curriculum (CBC) encourages such activities.

The National Treasury also intends to phase out personal benefits such as insurance and medical coverage for paid Kenyans. Car owners may be subject to additional fees, such as a yearly motor vehicle circulation tax dependent on engine size.

There are also plans to raise excise taxes on fossil-fuel-powered vehicles, examine the excise tax on hydrocarbon goods, and impose equivalent levies on coal.

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Despite its efforts to promote food security through greater farming, the government proposes to levy a tax of up to 5% on agricultural products.

The National Treasury is proposing increasing excise levies on alcoholic, cigarette, and sugar-sweetened non-alcoholic beverages in order to discourage their consumption due to health concerns, which could result in price increases.

Prof. Njuguna Ndung’u, Cabinet Secretary of the National Treasury, contends that these measures are required to fund the Bottom Up Economic Transformation Agenda (BETA) and align Kenya’s revenue with the East African aim of 25% of GDP.

However, given the continued economic issues created by the COVID-19 pandemic, many analysts anticipate that these plans will spark heated disputes, possibly salary reductions.

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