NEW TAX MEASURES TO HURT CONSUMERS

One of the audit firms in the country, EY has stressed that the newly introduced 16.5 percent Value Added Tax (VAT) on cooking oil which comes into effect on 1 October 2020 will hurt consumers.

The firm said in its tax update for the 2020 national budget that there is need for Treasury to engage oil manufacturers on the introduced VAT and consider making the price of cooking oil VAT inclusive to reflect the intention of the government.

The update reads, : "The manufacturers continue to benefit importation of raw materials duty free through the industrial rebate scheme. There will, therefore, be no expectation of increased oil prices since the oil industry is protected from adverse competition under the surcharge tarrif regime. However, VAT is a consumption tax, and the final consumer bears the final burden".

Minister of Finance, Felix Mlusu announced in the 2020/2021 National Budget Statement that the tax free bracket will be increased subject to enactment of the taxation amendment bill 2020.

The increase will be from K45,000 per month to K100,000 per month and the 15 percent middle tax bracket has already been proposed in the bill to be removed.

According to EY, the eleventh schedule to the taxation act was amended in 2019 and it applies not only to pay as you earn individuals, but to " individuals" business income as well.

The firm said, : "It is hoped that the proposed amendment will clarify on the scope of the intended disparity on allowable deductions  between the corporate entities and individual business income".

EY stresses that the proposed amendment on Capital Gains Tax, if not carefully analysed and pragmatically drafted, may cause confusion to the tax payers.

Income that accrues to a tax payer under section 11 of the taxation act, is income to which the taxpayer has a vested rather than a contingent right.

In a sense that a vested right is a right of ownership, including the right of enjoyment, which may however be postponed, and that a contingent 'right' is a  chance or a possibility of a right.