Kenyan taxpayers could face sweeping changes in how they are taxed, following new proposals in the Tax Laws (Amendment) Bill, 2024, and the Tax Procedures (Amendment) Bill, 2024.

Global audit firm PricewaterhouseCoopers (PwC) has flagged the Bills, cautioning that they could introduce significant disruptions across multiple economic sectors.

“PwC have just issued a Tax Alert which provides an in-depth analysis of the proposed amendments in the Tax Laws (Amendment) Bill, 2024, and the Tax Procedures (Amendment) (No. 2) Bill, 2024 (the ‘Bills’), presented to Kenya’s National Assembly on 4 November 2024,” the firm stated in its assessment of the legislation tabled by the Cabinet Secretary for the National Treasury and Economic Planning.

Sweeping changes to tax policy

The Bills propose several tax relief measures for employees, including adjustments to tax-free thresholds and deductions for contributions to the Social Health Insurance Fund and the Affordable Housing Levy.

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However, these reliefs come alongside significant new levies. Among the notable changes are the introduction of withholding tax on goods supplied to public entities and a reimagined tax for digital platforms under the "significant economic presence tax."

PwC expressed concerns over these digital tax revisions, pointing out that this marks the fifth amendment targeting the sector in just four years.

“Another amendment to the digital services tax which is now replaced with the significant economic presence tax. This is the fifth proposed amendment that has been introduced in respect of the digital services tax in the last four years demonstrating the uncertainty of tax policy around digital platforms,” PwC said, emphasising the lack of stability in this area of taxation.

The firm also raised alarms over a growing reliance on turnover taxes within the Income Tax Act, which traditionally targeted income.

Such shifts, it noted, risk creating a heavier financial burden for businesses and consumers alike.

Power and privacy concerns

Another controversial aspect of the Bills is the proposed expansion of the Commissioner of Taxes’ authority.

PwC warned that the amendments would require taxpayer systems to be integrated with those of the Commissioner, raising serious privacy concerns.

“The amendments intend to integrate taxpayer’s systems with the Commissioners which may intrude on taxpayer’s privacy,” PwC observed.

A strained economy under mounting debt

The proposals emerge against the backdrop of Kenya's economic struggles, with the government reeling from the political fallout over the Finance Bill 2024.

In July, protests over the Bill forced President William Ruto to withdraw the legislation, leaving a gaping hole in the national budget. The withdrawal compelled the government to plan for additional borrowing of Sh1 trillion for the current financial year.

“I have been working to remove Kenya from a debt trap but unfortunately that is not going to happen any time soon,” Ruto admitted in a media interview, voicing frustration over the country’s financial predicament.

With Parliament now deliberating the latest Bills, a fresh debate looms over whether these changes will solve Kenya’s revenue shortfalls or deepen the economic strain.

For many Kenyans, the proposals signal a potential clash between fiscal reforms and affordability, as the nation navigates an uncertain financial future.