The government plans to revive key parts of the rejected Finance Bill 2024. The focus will be on extending the tax amnesty and reducing tax expenditures. Treasury Cabinet Secretary John Mbadi confirmed the bill will not be reintroduced in full. Public protests led to its initial rejection.
Mbadi emphasized reinstating specific provisions through alternative legislative approaches. These include reducing tax expenditures and extending the tax amnesty. He assured that future policies would involve public participation. Reintroducing the bill in full would ignore public concerns, he noted.
The bill also aimed to reduce tax expenditures by changing VAT on bread from zero-rated to a standard 16%. Mbadi suggested moving essential items to the exempt schedule. This change would prevent businesses from claiming tax refunds on inputs, thereby reducing expenditures.
He also argued that businesses rarely pass zero-rating benefits to consumers. Instead, only businesses profit from these measures. The new Treasury Secretary also faces significant financial challenges. These include high debt payments and low tax revenues amidst economic instability.
Professor Njuguna pointed out that economic shocks like drought have worsened inequality. These shocks have also increased the government’s role in the economy. Debt sustainability is a pressing issue. Current revenue levels are not enough to cover rising debt risks.
Analyses showed that the Finance Bill 2024 aimed to increase tax revenues. It also sought to narrow the budget deficit and reduce debt vulnerabilities. Mbadi reiterated that moving items from zero-rated to exempt could help reduce tax expenditures.
However, the law prevents reintroducing the Finance Bill 2024 for six months after its rejection. Economist Churchill Ogutu suggested the government might introduce the bill’s progressive clauses sooner or propose other tax measures in the interim.
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