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Cabinet trims KRA boss' powers, approves tax exemptions in 2023/24 budget

President Ruto's Cabinet approved the exemption of taxes on LPG gas and other products

President William Ruto and Deputy President Rigathi Gachagua after a Cabinet meeting at State House, on April 27, 2023

President William Ruto chaired a special Cabinet meeting at State House, Nairobi, to approve the country's budget for the 2023/2024 financial year on Thursday, April 27, 2023.

The budget, which is estimated to be Sh3.6 trillion, includes various highlights, such as the economic outlook, revenue and expenditure projections, allocation to county governments, deficit financing, and the value chain approach.

One of the most significant highlights of the budget was the approval of a number of tax incentives aimed at addressing the high cost of living and boosting the collection of revenue.

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The Cabinet approved a plan to exempt Liquefied Petroleum Gas (LPG) from Railway Development Levy (RDL) and Import Declaration Fees (IDF), which will reduce the cost of LPG and promote its use instead of biomass fuel that destroys forests.

This move is expected to benefit millions of Kenyans who use LPG for cooking.

The price of LPG has been increasing steadily over the years, making it unaffordable for low-income households.

In March 2023, President Ruto announced that the government would introduce measures to bring down the cost of LPG gas.

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To improve the predictability of the excise duty rate, the Bill proposes to remove the provision that allows the Kenya Revenue Authority Commissioner General to adjust specific excise duty annually on account of inflation.

Former Commissioner General Githi Mburu in 2022, revised the excise duty of several products resulting in an increase in their prices.

He proposed a 6.3% inflation adjustment to cushion the government, as Kenya’s currency continued to lose value against the dollar.

Manufacturers oppose the proposal saying the adjustments portrayed an unpredictable tax regime which would scare away investors.

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The Cabinet also approved a bill that exempts VAT on tea purchased for export and assessed tax incentives required for domestic packaging materials to support value-addition for the tea export industry.

The bill is expected to promote local investments in manufacturing by introducing excise duty on imported fish and imported furniture.

To promote local investments in the manufacturing of vaccines and biopharmaceutical products for Africa and beyond, the bill provides tax incentives to companies that manufacture vaccine and biopharmaceutical products.

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This move is expected to boost the country's healthcare sector and position it as a hub for the production of high-quality vaccines and pharmaceuticals.

Additionally, the bill proposes amendments to support access to medical services by retired members of society, including tax exemptions on contributions and investment income to a post-retirement medical fund.

To improve the cost of construction and maintenance of telecommunication towers, the Bill proposes an investment allowance in respect of telecommunication.

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Additionally, the Bill seeks to provide that approved tax refunds be paid or automatically offset against tax liability within six months.

The Bill also includes a proposal to introduce a year amnesty on penalties and interest for the accrued tax debts, which currently stand at Sh1.5 trillion, including penalties and interests, to reduce the growing tax debt portfolio.

The next stage is to introduce the Bill in the National Assembly where President Ruto enjoys majority support.

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