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{
    "id": 1077277,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1077277/?format=api",
    "text_counter": 137,
    "type": "other",
    "speaker_name": "",
    "speaker_title": "",
    "speaker": null,
    "content": "Private contributions made to insurance companies enjoy tax relief. However, the contributions to the National Health Insurance Fund do not enjoy this relief despite the Fund being the largest medical cover for majority of Kenyans under the universal healthcare. In order to support the contributors and encourage more non-registered persons to join the Fund, I propose to amend the Income Tax Act to allow contributions to the NHIF qualify for tax relief at the rate of 15 per cent of the contributed amount. Hon. Speaker, the Income Tax Act provides for a tax rebate to employers who offer internship to a minimum of 10 university graduates for a period of one year. These employers are allowed to deduct, from their taxable income, an extra 50 percent out of the cost of the apprentice emoluments. In order to encourage employers to provide similar opportunities to TVET graduates, I propose an amendment to the Income Tax Act to include graduates of TVET institutions under the programme. Accordingly, employers who engage a minimum of ten graduates from both universities and TVET institutions will be allowed to deduct, from their taxable income, an extra 50 per cent out of the cost of the apprentice emoluments. It is my hope that employers will take advantage of this incentive and give our young graduates from the TVET institutions opportunities to gain practical experience so as to expand their employability. Last year, we revised the investment allowance regime under the Second Schedule to the Income Tax Act to introduce a new regime and retain the reducing balance method of deduction. However, under this method, deductions rarely get exhausted. In order to cure this problem, I propose to amend the Income Tax Act to replace the reducing balance method with the straight-line method which provides definite timeline for the deductions. This will provide certainty in taxation, ease tax administration and enhance compliance. We have noted that the current provisions on deductibility of interest allow some taxpayers to manipulate their balance sheets to reduce their tax liabilities. I, therefore, propose to replace the current thin capitalisation rule that is based on debt-to-equity ratio with interest restrictions based on a ratio of earnings before interest, taxes, depreciation and amortisation. Accordingly, any interest paid in excess of 30 per cent of a company’s earnings before interest, taxes, depreciation and amortisation will be disallowed in determination of taxable income. In addition to being an international best practice, this measure has been found to be a better indicator of the economic performance of businesses hence appropriate for determining the deductibility of interest on loans. This will guard against tax planning Hon. Speaker, I now turn to the proposed amendments under the Value Added Tax Act. In order to strengthen our healthcare system, make the cost of medicines affordable for Kenyans and step up the fight against COVID-19 Pandemic, I propose to introduce VAT exemption on medicaments used in our health facilities including decongestants and food supplements. Further, I propose to provide VAT exemption to diagnostic and laboratory reagents, artificial respirators including therapeutic respiration apparatus, breathing appliances, gas masks as well as medical equipment and technologies used in the provision of medical services. It is my hope that the suppliers of these medicaments and medical equipment will reciprocate by making their prices affordable. In order to promote local manufacturing of pharmaceutical products, I also propose to introduce VAT exemption on inputs used in the manufacture of medical ventilators and breathing appliances. This will enhance access to these products that are essential in management of the COVID-19 complications. Despite the huge potential for mineral and petroleum resources in this country, exploration and mining sector remains underdeveloped due to huge capital outlay The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}