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Kenya 2012 / 2013 Budget

Finance minister Njeru Githae brought the curtains down on President Kibaki’s economic reign when he issued his 2012/2013 Budget statement in Parliament spelling out the tax policies that will guide the country for the next 12 months.

Finance minister Njeru Githae

Finance minister Njeru Githae

Tenants in towns are likely to pay higher rents if Parliament passes Finance minister Njeru Githae’s proposal to tax all landlords with effect from next month.

The Kenya Revenue Authority was empowered in the Budget on Thursday to go ahead and map out – using the general positioning system (GPS) – all buildings and identify those for which tax on rental income was not being paid.

Landlords are expected to react to the move by raising rents to cover for the new taxes.

It is the first time that tax rental income is featuring in the budget during the Kibaki government.

“The Kenya Revenue Authority will shortly implement a comprehensive strategy to ensure that all landlords are effectively brought into the tax net and all rental income taxes are paid,” said Mr Githae.

In the Finance statement tabled before Parliament, Mr Githae also gave tax breaks to developers of commercial buildings who also provide infrastructure such as roads, sewers, power, water and other social amenities.

The construction industry has for a long time said provision of amenities that should otherwise be provided by municipal authorities or the central government was slowing down real estate growth.

And for the first time in years, the Treasury avoided taxing beer and cigarettes – otherwise called sin taxes – but allocated Sh1 billion to the National Committee Against Drug Abuse (NACADA) to enforce the Alcohol Control Act – also known as the Mututho rules.

Mr Githae said the government would also employ 5,200 health workers including the confirmation of 715 doctors who completed internship in March and a further 200 doctors to be recruited from the market.

The minister said the second phase of allowances for health workers would be implemented and new health centres and hospitals built.

Though the Kenya National Union of Teachers had asked for the recruitment of 40,000 workers, the proposals in the Budget Statement 2012 is for 10,000 new teachers.

Lecturers, judges, military officers and MPs who previous paid no import duty when they imported certain goods will now be required to pay it.

The military which was also being exempted from paying excise tax on certain locally produce goods sold within its premises will now be required to pay the duties.

In view of the vandalism of iron and steel structures in public infrastructure, the minister imposed a penalty of Sh1 million or a jail term not exceeding three years for offenders. He said the minister for Internal Security would also issue regulations requiring identification and traceability of all scrap metal handled by dealers.

He also imposed an import duty of 10 per cent on galvanised order to protect local iron and steel manufacturers who he said were facing unfair competition from cheap imports from the Far East.

As the 2015 deadline for migration from analogue to digital television signals approaches, import duty (25 per cent) on set top boxes – used to convert the signals – is to be removed.

The five per cent import duty on software has also been removed to make it cheaper and also attract foreign investors to the local ICT industry.

Bee-keeping received a boost with the proposal to exempt from duty imported inputs. Duty on food supplements will also be reduced to zero from 10 per cent to help address some nutritional problems.

The minister also proposed to exempt inputs used in the manufacture of medical diagnostic kits from any duty while reimbursing any duty to producers of food supplements for use by infants and persons living with Aids.

Churches, trusts, charitable groups and other non-governmental organisations will also be subjected to taxes under changes the Treasury proposes to improve administration of tax exemptions.

Traders in second-hand imported clothes will now only pay Sh1.1 million for a 20-foot container of imports instead of Sh1.9 million that is operational by the end of this month. He noted that higher tax had caused the businesspeople to reduce the imports significantly with some of them closing shop.

Source: Business Daily

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