The 2024 Finance Law will be very clear, parliamentarians assure bankers

The Finance Law of 2024 will have very clear and unambiguous provisions, the National Finance and Planning Committee of the National Assembly assured.

The promise was made on Wednesday morning by Committee Chairman Kuria Kimani (Molo) during a breakfast with representatives of the banking sector, under the auspices of the Kenya Bankers Association (KBA).

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

He was responding to claims by FCPA Edna Gitachu, tax policy consultant at KBA, that the law’s provision requiring entities to pay taxes within five business days had resulted in a 1,300 percent increase in the number of payments. of taxes per year, which led to enormous costs in tax administration.

“Honorable members, preliminary analysis of 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 labor average. “The same analysis shows that banks spent Sh1.18 million in additional costs to hire staff for tax compliance in 2023,” Gitachu said.

Kimani further noted that the Committee would align the Finance Law with other laws, after KBA Finance Director Kennedy Mutisya expressed concern that the newly introduced Housing Tax and Social Health Insurance Fund scheduled for be implemented in July 2024, will conflict with the Employment Law. and other laws and had decimated income from sales.

He told the Committee that the increased contributions had an effect on take-home pay and potentially breached the Employment Act’s one-third rule.

They proposed that the Committee consider reviewing individual tax bands and the top marginal rate.

KBA highlighted that this measure would protect people with low incomes from the impact of the cost of living, inflation and currency depreciation.

Other challenges raised by KBA officials were the short implementation period of the eTIM system and the excise taxes applied to financial and insurance services.

They also asked the Committee to consider revising taxes downwards, adding that high taxation does not necessarily translate into high revenue generation.

In response, Committee members Hon CPA Julius Ruto (Kesses), Paul Biego (Chesumei) and Hon Kimani attributed the introduction of new taxes in the latest Finance Bill to high budgetary demands from all sectors of government.

However, he noted that it was time for the county to consider managing its expenses within a realistic budget.

At the same time, the Committee has committed that, from the next financial year, it will maintain regular contacts with actors from various sectors of the economy after each passage of the Finance Bill, to audit the impact of the legislation on the economy .

“We are delighted to have the opportunity to conduct a mid-term review on the impact of the Finance Act 2023. However, we should not wait until the end of the implementation of the Act to share such insights. We want to commit that, going forward, we will engage regularly so that when we consider the Finance Bill, we have projected the provisions that need to be amended,” he said.

Meanwhile, the Committee has advised government agencies that they are yet to comply with the government directive that all transactions be captured through e-TIM.

Speaking on the matter, Kuria said the Committee would seek an explanation as to why some government agencies had failed to comply.

“The requirement that all entities join e-TIMs has allowed the government to expand the tax base and, consequently, generate more revenue. Therefore, we cannot understand why some parastatal government entities are still not complying. They should lead by example,” he stated.