Sunday, May 26, 2024

John Gachora: Proposed taxes to make banking expensive, raise cost of loans

Co-Op post

NCBA Group chief executive officer John Gachora has added his voice to the ongoing debate on the proposed punitive taxes that are contained in the Finance Bill 2024.

The controversial Finance Bill 2024 is proposing to delete value added tax (VAT) exemptions for certain financial services. This means that these services will be chargeable to VAT at the standard rate which is currently at 16 per cent.

The financial services that are set to be hit with VA include issuing of credit and debit cards, telegraphic money transfer services, foreign exchange transactions, including the supply of foreign drafts and international money orders, cheque handling, processing, clearing and settlement including special clearance or cancellation of cheques.

Issuance of securities for money, including bills of exchange, promissory notes, money and postal orders, the assignment of a debt for consideration, and the provision of financial services on behalf of another on a commission basis. In the same vein, the Bill is also proposing to subject to income tax the interest income earned by resident persons from infrastructure bonds.

“[The Finance Bill 2024 is] a curious introduction of both Tobin Tax and Robinhood Tax through the scrapping of VAT exemptions for banking transactions. It will make basic banking expensive, raise cost of credit, and drive people to the black market. Please read about those two taxes,” said Gachora.

“Kenya has been a leading light in financial inclusion globally. An unnecessary tax on banking transactions will make us uncompetitive. Large forex transactions will be offshored. [This is] completely unnecessary!”

Kenyans who want to invest in infrastructure bonds to pay 5% withholding tax

Gachora urged Members of Parliament to block the controversial proposals from being passed. “[I am] urging our MPs to do the right thing. Keep Kenya a leading light when it comes to banking and finance – reject this attempt to tax you for simple act of paying for goods and services,” he said.

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