Kenyans will have to wait longer to enjoy the reduction of Value Added Tax (VAT) on fuel after the Court of Appeal declared the Finance Act 2023 unconstitutional, a tax expert says.....CLICK HERE TO READ THE FULL ARTICLE>>>
The Finance Act 2023 had introduced laws such as doubling the VAT on fuel from 8 per cent to 16 per cent and also increasing new tax bands in Pay As You Earn (PAYE) for those earning between Ksh.500,000 and above.
Kenyans anticipated the Court of Appeal ruling to take effect immediately and a change to be witnessed at the pump but four days later, nothing has changed.
During a panel interview on Daybreak, Alex Kanyi, a partner at CDH Kenya, a firm which provides legal advice on real estate, intellectual property, data protection and other matters, explained that the government could be waiting for the interpretation of the court ruling by the Attorney General before implementing any changes.
This, however, presents a challenge as Attorney General nominee Dorcas Oduor cannot perform any duties until she is approved by Parliament.
The tax expert added that Kenyans could also expect a change in the pump prices in the monthly review prices announced by the Energy and Petroleum Regulatory Authority (EPRA).
“I’m not surprised with the petrol situation. For some reason, parliament does not effect the changes immediately and it’s not the first time,” Kanyi said.
“I’ve heard they’re waiting some interpretational guidance from the Attorney General. Maybe they’re also waiting till mid month so that then they tell us they have considered the judgment and will reduce the fuel cost by another 8 per cent.”
In relation to the PAYE bands, he noted that the tax rates introduced in Finance Act 2023 should not be implemented in the next payslip.
” We continue with the tax laws before Finance Act 2023. So you still have your income tax Act, VAT Act and other legislations that provide for tax. Only the amendments that were done through Finance Act 2023 will wait until the decision is made by the Supreme Court,” he noted.
“Up to Finance Act 2023, especially for PAYE, the bands were up to 30 per cent as the highest rate. However, Finance Act 2023 introduced a band of 32.5 % for anyone earning between Ksh.500,000 and Ksh.800,000 monthly and 35 % for anyone earning above Ksh.800,000. What it means, as you process you payroll, you need to think what were the effective rates before Finance Act 2023.”
The decision by the Court of Appeal to declare the Finance Act 2023 unconstitutional presents a tough predicament to the government which uses the Act in raising extra revenue to meet budget expectations.
Experts have argued that the government will opt to revert to Finance Act 2022, but the question remains whether this would address the revenue shortfall.
The country now waits for the Supreme Court’s final ruling on the appeal....CONTINUE READING>>
