Friday, 6 June, 2025
Finance Committee pledges enhanced civic education on future legislation
Kiambu National Polytechnic Thursday June 5, 2025
The National Assembly's Departmental Committee on Finance and National Planning, led by Chairperson Hon. Kuria Kimani, has committed to increasing civic education on the Finance Bill before public participation begins.
This pledge follows concerns raised by the public regarding the technical language often used in drafting legislation.
Speaking at the conclusion of Day 4 of the public participation exercise at Kiambu National Polytechnic (KINAP), Hon. Kimani assured the public that the Committee would work to simplify the language of future Bills.
"It is true that lawmaking is in some way technical, and the language used in some Bills tends to be a little challenging even to Members at times, but that is the nature of the drafting language. However, we will try and see if we can break future Bills to a language that everyone who is not a lawyer can understand," he pledged.
During the exercise, stakeholders and members of the public raised various issues concerning provisions of the two Bills, with a key focus on the need for a predictable business environment.
M-Kopa, a mobile phone assembling plant, highlighted the positive impact of the 2023 Finance Act's VAT zero-rating on locally assembled phones, which has spurred growth and access to affordable smartphones.
They strongly opposed the proposed paragraph 158 of the VAT Act (Section A Part 1 of the First Schedule), which aims to change the status of locally assembled and manufactured mobile phones from VAT Zero-Rate to Exempt.
"Hon. Chair, this proposal will lead to product cost increase making locally assembled phones less affordable. Consequently, this will lead to the drop in demand for locally assembled phones as imports will become more attractive," their representative told the Committee.
M-Kopa proposed either retaining the zero-rate status for locally assembled phones or applying VAT exemption across the full value chain to allow input VAT recovery and maintain affordability.
Echoing these sentiments, Mr. Jonathan Mwangi, a Kiambu town resident, urged the Committee to incentivize manufacturers by maintaining consistent tax provisions for companies for at least five years.
"This regular change of taxation provisions could discourage many investors. I propose that new companies with substantial investments be allowed a tax holiday of at least 5 years so they can break even and thrive," he stated.
Participants also called for progressive taxation and SME Support. Making submissions on this subject, the Architectural Association of Kenya (AAK) advocated for progressivity in taxation.
"Hon. Chair, we are proposing the realignment of personal income tax brackets to protect low and middle-income workers and avoiding blanket tax policies that disproportionately affect the financially underprivileged, such as raising VAT on essential items," they submitted.
Regarding support for SMEs, AAK recommended graduated tax compliance mechanisms for small and informal enterprises, including tax holidays, simplified filing processes, and turnover-based taxes to encourage formalization and compliance.
The Association also called for VAT reforms for the construction industry. To support the government's affordable housing agenda, they proposed retaining and extending VAT exemptions on critical construction products.
Earlier during the opening session, the legislators stressed the need for a good understanding of the Bills in order to address Misinformation
Committee Members Hon. David Mboni and Hon. Julius Rutto encouraged participants to familiarize themselves with the provisions of both Bills to offer informed views.
They noted that despite misinformation circulating online, the Bill does not introduce any new taxes. Emphasizing the role of the Finance Bill, they told the participants that the Bill not only outlines revenue-raising measures but also serves as an instrument for creating incentives across various sectors to foster investment and economic growth.
Turning to the Virtual Asset Service Providers (VASP) Bill, legal firm Njogu & Associates Advocates LLP expressed support for the proposed law, recognizing its potential to create a necessary regulatory framework for the sector.
However, they pointed out the dynamic convergence of virtual assets and betting, which has led to new forms of online gambling like crypto casinos and platforms.
They argued that while these platforms often leverage blockchain technology, offering perceived advantages such as transparency, enhanced security, anonymity, potentially lower fees, and faster transactions, a critical regulatory gap exists.
"Hon. Chair, despite its comprehensive definitions of virtual assets and virtual asset services, the VASP Bill, 2025 does not explicitly categorize ‘betting’ as a specific service activity or ‘betting platforms’ as a distinct type of VASP," they submitted.
"This definitional and jurisdictional gap presents a substantial risk of regular arbitrage," they added.
The firm posited that operators of crypto betting platforms could exploit this ambiguity, potentially operating without a VASP license, a gambling license, or with only a partial license, thereby creating an unregulated "shadow market."
The law firm further warned the Committee that such a regulatory vacuum would directly undermine the core objectives of both the VASP Bill and the Gambling Control Act, allowing illicit financial activities to flourish.
They also contended that this would erode customer trust in the digital economy and deprive the government of substantial tax revenue.
Noting that this situation could create an unfair competitive environment for traditional, licensed betting operators who adhere to established regulations, they urged the Committee to ensure the new law is stringent enough for customer protection.
The Committee will continue with the public participation exercise in Mombasa, Kilifi, and Kwale counties this weekend.