In a bold move to generate additional funds to support President William Ruto’s ambitious projects, the National Treasury of Kenya advocates a substantial increase in the Value Added Tax (VAT) rate.
The Kenya Kwanza government’s medium-term debt strategy for 2024–2025 and 2026–2027 includes a series of noteworthy tax reform proposals by the National Treasury.
One of the standout changes in the proposed tax overhaul is synchronizing Kenya’s VAT rate with its East African Community (EAC) counterparts. Currently, Kenya imposes a 16% VAT rate, while most EAC member states stand at 18%.
After a temporary hiatus, the National Treasury aims to reintroduce excise duty on alcoholic beverages and tobacco products.
Interestingly, under the archaic Finance Act 1923, no supplementary taxes were imposed on these goods.
The revision suggests a uniform excise rate for filtered, non-filtered, and other tobacco products, while their alcohol content will determine the excise tax on alcoholic beverages.
Kenyan citizens have until October 6, 2023, to provide input on these fiscal proposals.
Alcoholic beverages are taxed based on multiple factors, including consumer behavior, product value, consumption volume, and alcohol concentration. In a strategic document, the National Treasury emphasizes its intention to raise excise duties on spirits and other high-alcohol content products to address health concerns associated with excessive alcohol consumption. The proposal also aims to standardize excise duty rates for filtered and non-filtered cigarettes and other tobacco products.
According to the National Treasury, these changes aim to promote fairness and align with global best practices in taxation.
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