OVERVIEW: AN ANALYSIS OF THE TAX LAWS (AMENDMENT) BILL, 2020
On 25th March 2020, President Uhuru Kenyatta announced a raft of measures to cushion and stimulate the economy in light of the COVID-19 pandemic (the COVID-19 measures). Some of the COVID-19 measures, for example, the reduction of the Value Added Tax (VAT) rate from 16% to 14% are already in effect, pending any opposition/reservation by the National Assembly. However, many of the proposed COVID-19 measures require legislative amendments and consequently, the Tax Laws (Amendment) Bill, 2020 (the Bill) has been tabled before the National Assembly.
While the Bill includes COVID-19 measures, it goes much further. It will be recalled that in the last few years, enactment of the annual Finance Bill has often been delayed and the Courts had ruled that measures cannot come into effect without Presidential assent. One of the criticisms has been that while under the constitution, expenditure estimates needed to be tabled by the end of April each year, the revenue to finance this was only revealed during the Budget through the Finance Bill. It is possible that this Bill will in effect be replacing the Finance Bill 2020. If this is indeed the case, tax measures (other than the COVID-19 measures which may be earlier) will likely come into force on 1 July, although this is not guaranteed.
Other than attempting to legalize the COVID-19 measures, the Bill appears to be proposing whole scale removals and restrictions to a number of the exemptions and reliefs available under current tax legislation. While, exemptions and reliefs tend to erode a country’s tax base, which has been a perennial problem in Kenya, one must question the timing of some of these changes. The current COVID-19 crisis has unusually brought economic activity, other than for essential products and services, to a standstill globally but there will be an urgent need to kick start economies after the pandemic. Perhaps, some of the proposals included in the Bill would be better brought in once economic stability is ensured.
We have highlighted and analyzed the measures proposed in the Bill here.