Kenyans are on edge as the government gears up for another hit on their wallets, with new tax hikes looming in February. The recent signing of the Tax Amendment Act and Tax Procedures Act by President William Ruto has set the wheels in motion for significant changes, sparking concerns about the impact on already strained household budgets.
The Tax Amendment Act and Tax Procedures Act, signed into law by President William Ruto on December 11th, have introduced sweeping changes to Kenya’s tax regime. Effective from December 27, 2024, these amendments have revised key tax laws, including the Income Tax Act, VAT Act, and Excise Duty Act. The changes are expected to increase VAT and excise duties, leading to higher costs for consumer goods and business operations. Products such as sugar, alcohol, and plastics will see excise duty hikes, directly impacting prices for consumers.
Retirees are also in for a tough time, as the 15% relief on contributions to post-retirement medical funds, previously capped at Ksh.60,000 annually, has been abolished, leaving them to cover the full cost. The financial strain on salaried employees will deepen as National Social Security Fund (NSSF) contributions are set to double from Ksh.2,160 to Ksh.4,320, following the provisions in the NSSF Act of 2013.
Kevin Chege, Manager of Tax and Transfer Pricing at PKF, emphasized the impact of these changes, noting sharp increases in excise duty rates and the rise of the railways development levy on imported goods from 1.5% to 2%.
The digital sector will also face major adjustments. The digital service tax has been replaced with the significant economic presence tax, which will increase from 1.5% to 3% of turnover. Additionally, a 5% withholding tax on digital platforms could reduce earnings for those in the sector.
Experts are urging Kenyans to take advantage of tax amnesties to ensure compliance, warning that tough economic times lie ahead. As the February deadline looms, many are left wondering how much more they can endure amid relentless economic pressures.
Article By Suzy Nyongesa.