Understanding the Finance Bill

Imagine the government as a household that needs money to build schools, fix roads, and keep everything running smoothly. The Finance Bill is like the household’s budget plan, detailing how much money is needed and where it will come from. This bill outlines the taxes that the government will collect from each county to support the nation.

Tuesday’s Coffee Bar Session

This week’s Coffee Bar Tuesday focused on creating awareness among the youth about how the Finance Bill 2024 might affect them in the long run. The 2024 bill proposes significant changes to Kenya’s tax system, impacting how much individuals and businesses will pay.

Key Proposals in the 2024 Finance Bill

• Minimum Corporate Tax: Companies with lower tax rates might see an increase to ensure fair contributions from all businesses.
• VAT on Bread: The VAT on ordinary bread will rise from 0% to 16%, increasing the cost of a 400gm loaf.
• Car Tax Revamp: A new tax based on the car’s value, where owners will pay 2.5% of their vehicle’s current worth.
• Tax Decisions: The Kenya Revenue Authority (KRA) will take longer to make tax decisions, aiming for more thorough reviews, including tracking citizens’ personal accounts.
• Family Trust Income: Income from family savings accounts (trusts) will be subject to tax.
• Digital Services Tax (DST) Replacement: The DST will be replaced by the Significant Economic Presence (SEP) tax, which applies to non-residents earning income from digital services.

Youth Perspectives

Many youths are not overly concerned about these changes, believing they won’t be significantly affected. One participant mentioned, “We do not care about the increase in price of bread, since we were never raised on bread to begin with.”

Long-Term Impacts

• Although these changes might seem irrelevant now, they can have significant long-term effects:
• Better Infrastructure: Additional tax revenue can fund improvements in roads, schools, and hospitals.
• Fairness: A fair tax system supports a strong economy, benefiting everyone, including young entrepreneurs.
• Financial Awareness: Understanding taxes is crucial for financial management when you start earning.

Negative Impacts on Households

However, it’s crucial to consider the potential negative impacts on households, especially given the already high cost of living:

• Increased Cost of Living: The rise in VAT on bread from 0% to 16% will directly increase the price of this staple food, making daily essentials more expensive for families.
• Additional Financial Strain: New taxes on cars and family trust incomes can add financial burdens on households, especially those already struggling to make ends meet.
• Economic Inequality: Higher taxes on basic goods and services may disproportionately affect low-income families, widening the economic gap.

Citizen Involvement

• The discussion highlighted the importance of citizen participation in amending the Finance Bill.
• Citizens are encouraged to attend public participation forums and actively engage in the process.
• Youths should write memorandums to the National Assembly, voicing their concerns and suggestions.
• Reaching out to MPs can influence changes in the bill.

Conclusion

As the coffee bar session concluded, many young attendees left with a newfound understanding of the Finance Bill and their role in shaping it. By staying informed and involved, everyone in Kenya can contribute to a stronger financial system. The session was a great success, empowering the youth with knowledge and encouraging active civic participation.