The National Treasury is proposing the introduction of more taxes as President William Ruto’s administration seeks additional revenue to fund his ambitious programmes.

In the Kenya Kwanza government’s Draft Medium-term Debt Strategy for the period 2024-25 and 2026-27, the National Treasury proposes a raft of major tax changes.

Some of the highlights of the proposed tax reviews will be the harmonisation of the country’s VAT with the East African Community member states.

Most of the EAC states have VAT at 18 per cent while Kenya charges 16 per cent.

At the same time, the National Treasury is proposing to put alcoholic beverages and cigarettes on the radar again with excise duty after a short reprieve.

The government did not impose additional taxes on the products under the Finance Act, 2o23.

Excise rate for filtered cigarettes, non-filtered cigarettes and other tobacco products will be harmonised while excise duty on alcohol will be pegged on alcohol content

Kenyans have until October 6, 2023, to submit comments on the proposals from Treasury.

Currently, taxation of alcoholic products is based on various criteria including, consumer behaviour, value of the product and the volume of consumption as well as alcohol content.

”In order to streamline the taxation of alcoholic products, over the strategy period, the government will review the basis of taxation to the alcoholic content of the product taking into consideration the harmonisation with EAC region,” the proposals read in part.

The National Treasury says in the draft strategy paper that the government will increase exercise duty on spirits and higher alcohol content products to discourage their consumption as they pose higher health risks.

”This will be informed by quantitative analysis to determine the optimal tax rate that will be applicable to each alcoholic product,” reads the draft medium-term debt strategy.

Regarding exercise duty on cigarettes and other tobacco products, the National Treasury proposes to harmonise exercise duty rate across filtered cigarettes, non-filtered cigarettes and other tobacco products.

The National Treasury says it will take into account international best practices and promote fairness.

”Given the negative health externalities of these products, the rates will be based on the extent of the externalities of these products as well as recommendations of the ongoing EAC partners states study,” the treasury says.

The Kenya Power and lightning company, (KPLC) has asked its customers to provide them with a list of data so as to be included in the Tax Invoice Management System (TIMS).

This new directive affects businesses which claim VAT. According to KPLC, the directive is in compliance with the Electronic Tax Invoice (ETI) Regulations 2020, gazetted on September, 25.

“In compliance with the Electronic Tax Invoice (ETI) Regulations 2020, gazetted on 25th September vide Legal Notice No. 189 of 2020, KRA introduced a new system called Tax Invoice Management System (TIMS) to replace the current ETR regime aimed at facilitating the administration of Value Added Tax (VAT).”

The TIMS was introduced by Kenya Revenue Authority to replace the current ETR regime aimed at facilitating the administration of Value Added Tax (VAT).

“In order to comply with the above directive and correctly capture the customer information on the invoice, we request that our customers provide us with the data below before 30th September 2022,” KPLC said.

Requirements

• PIN number
• Correct names as they appear on their National Identity Card
• Partnership Certificates
• Certificates of Incorporation or any other legal registration documents
• Email Address
• Telephone Number
• Postal address and Postal code.

KPLC has directed that the data can be taken to any of their offices countrywide or sent through their official social media handles.

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KRA extended the deadline for the requirement by taxpayers to comply with regulations of TIMS to September 30 2022.

VAT-registered taxpayers are required to fully transition to use of Electronic Tax Registers that meet the requirements outlined in the Regulations.