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 Azimio la Umoja yesterday vowed it will reject proposals to raise taxes as contained in the 2023 Finance Bill that Leader of Majority in the national Assembly Kimani Ichung’wah tabled in Parliament last week.

The Bill, now at the public participation stage, proposes a raft of measures meant to expand the tax base as President William Ruto’s administration races to raise revenues and fund its Sh3.6 trillion Budget for the 2023/24 financial year. 

Azimio leader Raila Odinga said the taxes the government intends to impose will hurt the ordinary citizens, especially the jobless and the poor who are struggling with a high cost of living.

“In the event that Kenya Kwanza uses its hired majority and passes the Bill as it is, we want the people of Kenya to understand that it is Kenya Kwanza’s Bill. It will be Kenya Kwanza strangling Kenyans. We will instruct our MPs to have nothing to do with it,” Raila said at a press conference.

He particularly took issue with a proposal to raise turnover tax from the current one per cent to three per cent, arguing that this will cripple the growth of small and medium-sized businesses, which are also taxed by county governments. The tax —which was applicable to sales worth Sh1 million and above — will now be imposed on gross sales starting from Sh500,000.

Raila also said the government should stop income tax adjustments targeting employees who, he said, had not received salary increments over the last five years. Government workers were recently subjected to delayed salary remittances while many workers in the private sector either experience pay delays or had their salaries reduced since the Covid-19 pandemic.

The government intends to adjust income tax at graduated rates, with the highest set to rise from 30 to 35 per cent for employees earning more than Sh500,000 a month. Raila defended employees in this tax bracket, arguing that much of their earnings is consumed by loans, statutory deductions and social protection expenditures for their extended families.

“The shock will be felt down the chain. Typically, a single pay slip supports entire villages and communities in Kenya,” he said. “As Kenya Kwanza reduces the availability of local disposable income, it is inadvertently reducing local demand for goods and services,” Raila warned.

 Illegal borrowing

He also described the proposed three per cent tax on basic salaries for the housing levy as irrational. The opposition noted that the deduction will eat into workers’ disposable income, which will in turn strain the economy as people will have less money to spend. Additionally, the opposition noted, not every contributor to the affordable housing scheme will qualify or desire to own a house under the programme.

“This is illegal borrowing. According to the Bill, those who do not qualify for the affordable houses will have their monies refunded or transferred to beneficiaries, after seven years. There is no mention of interest accrued on the money,” Raila said. In his view, an employee who does not need a house should not have his money tied up in a housing scheme when such a worker would wish to spend the money on farming or just feeding family.

He also took issue with the 15 per cent tax that will be imposed on digital businesses. According to him, the tax targeting the untaxed creative economy will kill innovation and leave the youth with fewer options of earning a living in a country struggling with high rates of employment.

Azimio further opposed the creation of a Tax Appeals Tribunal to which a business or an individual with a tax dispute with the Kenya Revenue Authority can appeal. The law proposes that any individual or company with such a dispute will be required to deposit 20 per cent of the disputed amount with KRA before the matter can be heard by the tribunal. According to Raila, such a system will be open to abuse by KRA officials.

On the proposed tax on beauty products, which will be raised by 316 per cent if the Finance Bill is passed, the opposition faulted the government for intending to bring down an industry that has employed a large number of youth and women. The provision proposes to tax wigs, human hair and artificial beards among other beauty and personal grooming products and accessories.

On building and construction, Raila also faulted the Treasury’s proposal to increase exercise duty on imported cement. He said if this is passed, local producers will ramp up their prices and this will impact negatively on the construction industry.

He also warned that enhanced value-added tax on flour, pharmaceutical products and agricultural pest products — all of which are currently zero-rated — would raise the cost of medicine, healthcare and food.

Meanwhile, Public sector unions yesterday urged Parliament to throw out various sections of the Finance Bill, 2023.

The unions, led by Kenya Universities Staff Union (KUSU) official Charles Mukhwaya said failure by the government to respond to their demands would see all public servants unite and go on strike at once.

“We demand that the government reduces taxes imposed on workers, failure to which the public sector unions will consider industrial action and other measures provided by law,” warned Mukhwaya at a press conference in Nairobi.

Universities Academic Staff Unions (UASU) Secretary General Constantine Wasonga added: “We are going to call a big strike. The burden is too heavy for us. I want to thank the government for uniting the public sector unions and we are going to strike in one go. You will see teachers out, lecturers, doctors and county government workers out… Will you manage?”

Huge burden

Also present were representatives from the Kenya Medical Practitioners and Dentist Union, Kenya National Union of Nurses, County Government Workers Union and Kudheiha. The officials criticised proposals to raid public servants’ pay slips by the government which, among others, also intends to raise National Hospital Insurance Fund contributions starting from July 1.  Private sector workers will also be required to pay higher retirement contributions once the Bill becomes law.

Yesterday, union leaders voiced their criticism of some of the proposals, saying these will overburden workers whose salaries are deducted at source.

“This will leave most employees with pecuniary embarrassment as their earnings are already fully committed. This over-taxation is a huge burden on public workers and renders them unable to afford basic commodities. The high cost of living makes a public service employee a slave who cannot afford a decent life,” said Mukhwaya.

He and other union officials called on government to immediately engage workers’ representatives in the public sector to agree on the way forward. They also demanded that the government speeds up negotiations and implementation of all pending Collective Bargaining Agreements (CBA).

Meanwhile, the Kenya Union of Special Needs Education Teachers (KUSNET) also called on parliamentarians to reject the Financial Bill, saying that if this is not done, then it would call its members to strike.

KUSNET Secretary General James Torome said the Bill proposing a three per cent deduction from workers’ basic pay to go towards the National Housing Development Fund was misadvised.

“The Finance Bill, 2023 is a vicious attempt to turn Kenyan workers into paupers. It is the wrong time for such a Bill to be presented while the nation is still grappling with high food prices and high cost of living,” said Torome.

Additional reporting by George Sayagie