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What are the controversial parts of the Finance bill?

Introduction

The Finance Bill, 2023, is a piece of legislation that proposes amendments to various laws in Kenya, primarily aimed at raising revenue and addressing economic challenges. However, the bill has sparked significant controversy, with various stakeholders expressing concerns about its potential impact on the Kenyan economy and the lives of citizens. This response will delve into the controversial aspects of the Finance Bill, 2023, drawing upon relevant legal provisions and analyzing their potential implications.

Table of Contents

1. Controversial Provisions

   1. Digital Content Tax

   2. Housing Levy

   3. Excise Duty on Betting and Gaming

   4. Value Added Tax (VAT) on Imported Goods

   5. Income Tax Amendments

2. Conclusion

Controversial Provisions

1. Digital Content Tax

The Finance Bill proposes the introduction of a 15% digital content tax on online platforms such as Netflix, Spotify, and YouTube. This tax would be levied on the gross revenue generated by these platforms within Kenya.

• Sources:

  • Finance Bill, 2023, Section 10

  • The Value Added Tax Act, 2013

• Controversy:

  • Double Taxation: Critics argue that this tax could lead to double taxation, as these platforms already pay corporate tax on their profits.

  • Impact on Consumers: The tax could result in increased subscription fees for consumers, making these services less accessible.

  • Competition: The tax could disadvantage local content creators who may not have the resources to absorb the additional cost.

2. Housing Levy

The bill proposes a 1.5% housing levy on all employed individuals, to be deducted from their salaries. This levy is intended to fund the development of affordable housing projects.

• Sources:

  • Finance Bill, 2023, Section 11

  • The Housing Act, 2012

• Controversy:

  • Burden on Employees: Critics argue that the levy will place an additional financial burden on employees, particularly those with low incomes.

  • Lack of Transparency: Concerns have been raised about the transparency and accountability of the housing levy fund.

  • Alternative Funding Sources: Some argue that the government should explore alternative funding sources for affordable housing, such as public-private partnerships.

3. Excise Duty on Betting and Gaming

The bill proposes an increase in excise duty on betting and gaming activities. This increase is intended to discourage gambling and generate additional revenue.

• Sources:

  • Finance Bill, 2023, Section 12

  • The Excise Duty Act, 2015

• Controversy:

  • Impact on Industry: The increased excise duty could negatively impact the betting and gaming industry, leading to job losses and reduced investment.

  • Effectiveness: Critics argue that the increased excise duty may not be effective in discouraging gambling, as it could simply be passed on to consumers.

  • Alternative Measures: Some suggest that the government should focus on alternative measures to address gambling addiction, such as education and awareness campaigns.

4. Value Added Tax (VAT) on Imported Goods

The bill proposes to expand the scope of VAT on imported goods, including items such as raw materials and machinery.

• Sources:

  • Finance Bill, 2023, Section 13

  • The Value Added Tax Act, 2013

• Controversy:

  • Impact on Businesses: The expanded VAT could increase the cost of imported goods, making it more expensive for businesses to operate.

  • Inflation: The increased cost of imported goods could contribute to inflation, eroding the purchasing power of consumers.

  • Competitiveness: The expanded VAT could make Kenyan businesses less competitive in the global market.

5. Income Tax Amendments

The bill proposes various amendments to the Income Tax Act, including changes to the tax rates and deductions.

• Sources:

  • Finance Bill, 2023, Section 14

  • The Income Tax Act, 2015

• Controversy:

  • Tax Burden: Some amendments could increase the tax burden on individuals and businesses, particularly those in the middle and lower income brackets.

  • Investment Disincentives: Changes to tax deductions could discourage investment and economic growth.

  • Fairness: Concerns have been raised about the fairness of the proposed tax amendments, with some arguing that they disproportionately impact certain groups.

Conclusion

The Finance Bill, 2023, has generated significant controversy due to its proposed tax measures and their potential impact on the Kenyan economy and citizens. The bill's controversial provisions, including the digital content tax, housing levy, excise duty on betting and gaming, VAT on imported goods, and income tax amendments, have sparked debate and raised concerns about their fairness, effectiveness, and potential consequences. It is crucial for the government to carefully consider these concerns and engage in meaningful dialogue with stakeholders to ensure that the bill's provisions are equitable, sustainable, and conducive to economic growth.