Zachary Ochuodho @zachuodho

Treasury Cabinet Secretary Ukur Yatani yesterday presented tax measures which the government will use to generate revenue for 2020/21 financial year.

Among the measures proposed to be used include the rental income tax threshold that will be revised from Sh10 million to Sh15 million per annum.

“Mr Speaker, the government introduced a simplified monthly rental income tax in 2016 to enhance tax compliance.

Under this regime, rental income is taxed at the rate of 10 per cent for individuals earning annual rental income of Sh10 million and below.

Mr Speaker, the Sh10 million per annum threshold has brought a positive impact on tax compliance,” the CS said.

The CS also proposed to introduce a minimum tax payable by all companies at the rate of one per cent of gross turnover as a stop-gap measure to bust companies that evade taxes but still benefit from amenities funded by local taxpayers.

Penalty waiver

Yatani also proposed that there should be a three-year voluntary disclosure programme to allow Kenyans who made omissions in tax returns in the last five years to pay dues owed without interest and penalties.

“The programme will run for three years. In order to encourage uptake of this programme, I further propose to grant relief for penalties and interest in respect of the tax disclosed after payment of the principal tax,” he said.

The Budget introduced a digital service tax on value of transactions at the rate of 1.5 per cent.

According to Yatani, the new tax measures will raise an additional Sh38.9 billion in revenues as the government grapples to find ways to plug a Sh840.6 billion deficit.

He said although some of the measures taken by the government to cushion the public against the Covid-19 pandemic will reduce revenue collection by negatively impacting on income tax, import duty, value added tax and customs and also impact on the internally-generated appropriation-in-Aid.

“These measures are expected to generate about Sh38.9 billion in tax revenue to the Exchequer,” the CS said.

The CS proposed that maize or corn seeds be exempted from the Value Added Tax (VAT), in order to make them affordable to farmers. 

“I have proposed to exempt ambulance services from VAT in addition to medical, nursing and dental services which are currently exempt from VAT to cushion Kenyans from the high costs of such services,” he said

Yatani proposed that imports by the Kenya Defence Force and National Police Service be exempted from both Import Declaration Fee and Railway Development Levy on all goods imported for the official use by the Kenya Defence Forces and the National Police Service.