Members of Parliament (MPs) are being called upon to support the public during these challenging times. The government aims to address the worsening economic situation through the controversial Financial Bill 2023, which includes several tax proposals to meet its ambitious Sh3.6 trillion budget.
The bill suggests implementing a 35 percent tax rate for monthly incomes exceeding Sh500,000. It also requires employees to contribute 3 percent of their salaries to an affordable housing project, with employers matching this contribution for each employee. Additionally, turnover tax would increase from 1 percent to 3 percent, and VAT on petroleum products would rise from 8 percent to 16 percent.
While the government argues that these measures are necessary to navigate the worsening economic conditions, critics of the bill view it as a bitter pill that exacerbates an already difficult situation. They believe that raising VAT on petroleum products, whose prices have recently soared, would make life even more burdensome. Compelling workers, whose incomes have been eroded by the high cost of living, to contribute to the housing project would further worsen their living conditions.
The decision made by MPs regarding the Financial Bill will have a significant impact. If they support the bill as it stands, it will likely result in increased financial strain on the public. The higher tax rate for high-income earners would reduce their disposable income, potentially affecting their purchasing power and overall economic activity. The mandatory contributions to the housing project would further reduce workers’ take-home pay, making it harder for them to meet their daily needs.
Additionally, the proposed increase in turnover tax and VAT on petroleum products would have ripple effects on businesses and consumers alike. Higher turnover tax could burden small and medium-sized enterprises, potentially leading to layoffs or business closures. The increased VAT on petroleum products would directly affect transportation costs and could contribute to a rise in prices for various goods and services, further squeezing consumers’ budgets.
Therefore, it is crucial for MPs to consider the impact of these proposals on the public and the overall economy. They must weigh the potential benefits of increased tax revenue against the potential harm to individuals and businesses. The decision they make should aim to strike a balance between meeting budgetary requirements and mitigating the negative consequences for the people they represent.