In Summary
  • The Treasury increased the rates of excise duty on cigarettes, wines and alcoholic spirits by 15 per cent.
  • This means a bottle of wine and a packet of cigarette will now cost at least Sh18 and Sh8 more, respectively.
  • Boda boda operators, who have been accused of recklessness, will now have to get comprehensive insurance cover.

Treasury Cabinet Secretary Henry Rotich raided the wallets of the poor Thursday in a capitalist budget that will, for a good measure, be funded by caterers, security guards, gamblers and bodaboda operators.

SIN TAXES

Also feeling Mr Rotich’s tight squeeze are smokers and alcohol consumers, who, with the multibillion-shilling betting industry, attract sin taxes and are frequent victims of hikes on levies whenever the government is in a fix.

In a raft of painful measures that Mr Rotich defended as being aimed at “expanding the tax bracket”- which means plunging more people into the taxation pool — Treasury increased the rates of excise duty on cigarettes, wines and alcoholic spirits by 15 per cent. This means a bottle of wine and a packet of cigarette will now cost at least Sh18 and Sh8 more, respectively.

After the Sh18 adjustment, the total excise duty on a 750ml bottle of wine will now be Sh136 while duty on a bottle of whisky will go up by Sh24 to Sh182 for a similar bottle. Bigger quantities will attract more. The excise duty on a packet of 20 cigarettes will increase by Sh8 to Sh61 per packet.

In his 2019/20 Budget, themed ‘Creating Jobs, Transforming Lives: Harnessing the Big Four Plan’, Mr Rotich, however, protected banks and owners of capital, and shielded exporters, government suppliers, among other interest groups that run the economy.

But he had more painful news for the rest of the population. For instance, it will cost more to dispose of property in the coming year as those who want to sell their properties will have to pay a capital gains tax of 12.5 per cent, up from 5 per cent. A capital gains tax is charged on the difference between how much one bought the property and how much they are selling it at.

But Mr Rotich saw it as a positive measure, especially for corporate entities, whom, he said, will have a chance to “restructure their operations for efficiency and market penetration” as a result of the higher tax.

DIGITAL ECONOMY

The Treasury also imposed withholding taxes on people who offer security, cleaning and fumigation, and catering services outside hotel premises, as well as transporters of goods, excluding air transport services, sales promotion, marketing and advertising services.

Until now, only professionals who charged management and professional fees were being charged withholding taxes, at a rate of five per cent. This means that, for every Sh10,000 earned by these professionals, Sh500 will be remitted to KRA upfront on or before the 20th day of the following month.

“This measure will enhance tax compliance by persons offering these services,” Mr Rotich noted.

Also, the youth, who are making money from the digital economy, will no longer live outside the tax dragnet. Mr Rotich proposed measures “that are aimed at providing the platform for taxation of income generated from the digital economy so as to boost our revenues for inclusive economic development”. He, however, did not reveal how he will go after them.

The Treasury CS said he expected the new taxes to generate an additional Sh37 billion.

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