Storm Over KRA's Tax on Travellers

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TOP STORY: Storm Over KRA Custom Checks

The last few days have seen the Kenya Revenue Authority (KRA) face backlash for a directive affirming a tax on travellers’ personal and household items worth $500 (Ksh75,000) or more upon arrival at the Jomo Kenyatta International Airport (JKIA).

A post on X by the authority rehashing this existing customs rule stirred controversy, with concerns about poor arrivals’ handling, long queues, and potential exploitation. The tax applies to a wide range of passengers, including missionaries, diplomats, returning residents, and foreign students.

KRA's acting Deputy Commissioner, Policy and International Affairs, David Ontweka, explained that passengers bringing in items exceeding $500 must declare them, such as clothes, personal effects, and phones. He, however, clarified that such goods will only be taxed if their value exceeds $500 (Ksh75,500) and if they are more than one item.

 "When you travel out of the country when you come back you'll always come with the clothes and bags you went with. But where you purchase goods of a value of USD500, which are more than one, then you are required to declare the rest for purposes of tax.”

Concerns have arisen over KRA's customs handling of passengers, leading the National Assembly Defense, Intelligence, and Foreign Relations Committee to call out KRA for alleged harassment and intimidation of travellers, emphasising the importance of a professional and transparent approach during the peak tourism season.

KRA has since stated that it is planning on reviewing the amount upwards to reflect the changes in the USD to KES exchange rates.

“KRA is in the process of reviewing this regulation to a higher limit and this shall be communicated to the public in due course,” the revenue authority said in a notice. Read More.

Bankers Protest 5-Day Tax Rule

The banking sector is urging Parliament to reconsider a new law that requires firms in high-risk tax under-declaration sectors to remit tax every five days.

The Kenya Bankers Association (KBA), the banking sector lobby group, has raised concerns about the administrative challenges created by the Finance Act of 2023, which mandates commercial lenders to compute Withholding Tax daily and remit it within five days. 

This law, amended through the Finance Bill 2023 (now Act) initially required tax payments for excisable goods and services by the 20th of the following month but now imposes a stricter five-day deadline.

The KBA highlights the daily accrual of interest, making it necessary to process and remit excise duty daily for compliance by the 5th day of tax collection, resulting in additional administrative burdens for commercial banks.

The controversial Finance Act of 2023 includes commercial banks in the requirement to pay taxes every five days, with a focus on high-risk sectors like betting and gaming, where daily dues are mandatory. Equity Bank Group Tax Manager, Wilfred Alambo, says this has forced banks to invest in new technology to manage the administrative aspect of the five-day tax remittance requirement.

Kenyans are Drastically Cutting Their Spending

A recent survey by TransUnion reveals that 56% of Kenyan households have cut back on non-essential spending due to rising costs. This reduction in discretionary spending has affected various age groups, with millennials and Gen Z experiencing the largest cut at 66% and 55%, while boomers reduced such spending by 35%. 

The areas most impacted by these cuts are dining out, travel, and entertainment. Rising inflation and fuel prices have played a role in curbing household spending, with fuel consumption dropping to the lowest level in over five years, in part due to high pump prices. Increased taxation has further contributed to reduced household consumption, prompting warnings from international organisations like the World Bank and IMF.

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