This archive report was first published on 19 June 2020.
Kenyan retirees can breathe a sigh of relief as the National Assembly has opposed new pension tax proposals. The finance bill had proposed the removal of existing tax incentives, including income exempt from tax, such as National Social Security Fund (NSSF) and bonus, overtime, and retirement benefits not exceeding 10 percent.
However, following consultation with the National Treasury, the proposal to tax retirement benefits has been dropped. The National Assembly Departmental Committee on Finance and National Planning, in their submission, has opposed taxation on pensions, citing concerns over the negative impact on the interest earned by members and the potential to discourage savings into pension schemes.
Chairman Joseph Limo revealed that the committee had consulted with the National Treasury and agreed to drop the proposal to tax retirement benefits. He stated that subjecting income of NSSF to tax would have a negative impact on the interest earned by members and would lower pensions and reduce disposable income to retirees.
Zero-Rated Products ¶
The committee also maintained that liquefied petroleum gas (LPG) and propane should remain zero-rated, as imposing VAT on LPG would adversely affect Kenya's aspired socio-economic transformation.
Additionally, the committee adopted the proposed amendment to include the supply of maize (corn) flour, cassava flour, and wheat or meslin flour as zero-rated products, making these products cheaper and affordable to Kenyans.
Reversal of Betting Tax ¶
The parliamentary committee also agreed to remove excise duty on betting, reversing the negative effects of this tax on the industry. The closure of betting companies in Kenya, such as SportPesa, was attributed to the high taxation, yet international players continued to operate.
According to the committee, the proposed amendments to the various tax laws as contained in Finance Bill 2020 are expected to raise additional revenue of Ksh38.85 billion for the FY 2020/21 budget.
Mr. Limo recommends that the National Assembly adopts the Finance bill with the amendments.
