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{
    "id": 1346438,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1346438/?format=api",
    "text_counter": 330,
    "type": "speech",
    "speaker_name": "Molo, UDA",
    "speaker_title": "Hon. Kuria Kimani",
    "speaker": null,
    "content": "Hon. Temporary Speaker, the National Tax Policy of 2023 shall create predictability in tax laws by analysing the challenges present in the current tax regime and setting guidelines and objectives to address them. It will be aligned with the medium-term revenue strategy with an aim of economic recovery through the Government’s ‘Bottom-up Economic Transformation Agenda (BETA). The guidelines aim to solve the present challenges affecting revenue collection by expanding the tax base, having international best tax practices and developing a framework for granting incentives. The Committee proposes the expansion of the scope of the hard to tax sectors to include the digital sector, which is a large sector that has remained un-taxed. The three sectors are the digital economy, the informal sector and the agriculture sector. The policy shall provide more innovative ways to expand the tax base. There is need to provide alternative ways to tax the informal sector. For instance, there is a possible reason for withholding tax. This may require businesses to withhold them at source when making payments to the hard to tax sectors. The Committee has proposed amendment to the National Tax Policy to provide for an efficient funding structure that ensures that settlement of approved tax refund is done within six months. Currently, there is no model for tax refunds, and this has created challenges for businesses. Businesses have their funds withheld for long periods of time, hence reducing their working capital. An efficient structure will ensure that the refunds are made within a short period of time and taxpayers can plan ahead. As it is now, KRA may owe you money on input Value Added Tax. You may be obligated to pay taxes like PAYE and Corporate Tax. You have applied for a refund, but they may not refund you. If you delay in paying them their dues, that money would accrue interest and penalties yet they owe you money. This amendment was critical to ensure that now you can net off your liabilities on other taxes. You may have stopped doing business and KRA owes you money, but you are not in a position to offset that tax against another one. This policy provides that the National Treasury must allocate funds for approved tax refunds so that they can be made within six months after the approval. Hon. Temporary Speaker, the Committee has proposed to amend the policy to ensure that tax expenditure estimates are explicitly provided in the annual budget estimates presented to the National Assembly during the budget recycle to improve budget transparency. This obligates the National Treasury to publicise reports on annual tax expenditures. Further, it will set out a progressive tax structure that ensures that the marginal rate is not higher than the Corporate Income Tax rate. Currently, the marginal rate of 35 per cent is 5 per cent higher than the Corporate Income Tax of 30 per cent. That means an individual is taxed at higher rate than a corporate entity, and also a higher tax base considering that individuals are taxed on their gross earnings while corporations can pay for deductions for the expenses incurred in the production of their income. Individuals are not allowed to claim deductions. Corporate Tax is calculated by taking the profit of an entity minus the allowable deductions and then applying the 30 per cent Corporate Tax on the net income. However, individuals are not allowed to have any deductions on their PAYE. To give an example, when a company makes a profit Ksh100, 000, they are allowed to make deductions of the expenses they incurred to get that income. This is called allowable expenses. Then we take 30 per cent of that net and calculate it as the Corporate Tax. If you go to an individual who earns a salary of Ksh100,000, the only deductible allowance is contribution to the National Social Security Fund (NSSF) to a particular percentage. The rest is applied to one basic rate. It means that salaried people end up paying higher taxes than corporations. This policy seeks to amend that scenario so that we have individuals paying the same tax as corporates. This will also help to 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"
}