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Eyes on Uhuru over new airtime, bank loan taxes

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Eyes on Uhuru over new airtime, bank loan taxes


President Uhuru Kenyatta

President Uhuru Kenyatta signs the Division of Revenue Bill, 2021 into law at State House, Nairobi, on April 30, 2021. PHOTO | PSCU

President Uhuru Kenyatta holds the key to the enforcement of new taxes that could make bank loans, Internet access and mobile phone calls costlier from tomorrow.

The President has the option to back or reject the new taxes that MPs introduced in the government-backed Finance Bill after Parliament forwarded the Bill to State House for approval.

MPs increased excise duty on airtime and data from 15 percent to 20 percent, which will see the Treasury raise at least Sh8 billion from Safaricom #ticker:SCOM, Airtel and Telkom Kenya.

This proposal was not in the Finance Bill and it remains to be seen whether the President will back the airtime tax despite the levy missing from the Treasury’s plans.

The 2021-22 financial year’s budget is expected to cement the legacy of Mr Kenyatta’s 10 years in office in a tough economic setting clouded with depressed corporate and household earnings amid uncertainties arising from the Covid-19 pandemic.

Parliament rejected the Treasury’s proposal to change the way tax on bread is calculated in a shift that would have seen bakers stopped from seeking refunds from raw materials such as electricity that attract VAT.

This could have led to an increase in bread prices and pushed it out of reach of a majority of households that are grappling with Covid-19 economic hardships.

But MPs backed the Treasury’s bid to reintroduce the 16 percent VAT on cooking gas and a 20 percent excise tax on the fees and commissions earned on loans.

This means households will from tomorrow pay at least Sh350 more for the 13-kilogramme cooking gas, adding to the pain of costly energy such as petrol and electricity.

The excise duty on bank loan fees will see banks pay the taxman more than Sh7 billion annually, which risks making credit costly for homes and businesses as lenders transfer the burden to borrowers.

The approval by Parliament followed its review of the Finance Bill, which contains taxation measures for the new financial year starting July.

This now shifts the focus on President Kenyatta, whose final signature is needed to give amendments to the Finance Bill, 2021 legal force.

The Treasury is targeting about Sh2.04 trillion in total revenue compared with Sh1.83 trillion estimates for the current year ending this month, according to the Budget and Appropriations Committee report.

Ordinary revenue streams for the Treasury – comprising taxes and non-tax streams such as court fines, charges for use of government services, rent, and forfeitures — are expected to hit Sh1.78 trillion, or 87.10 percent of the revenue projections.

Safaricom on Tuesday warned that it would increase airtime and Internet charges if the President backs the MPs’ proposal to raise excise duty by five percentage points.

“This being a consumption tax, the burden, unfortunately, has to be absorbed by customers,” Peter Ndegwa, the Safaricom CEO, said.

“Our plea to the government is to rethink this tax increase given the current economic environment. Mobile services have come to support a majority of people who have been negatively impacted by the Covid-19 pandemic relying on mobile services to work from home, learn or earn a living. The increase will thus only intensify the negative impact on our people.”

Excise duty

In 2018, the government increased excise duty on mobile phone services from 10 percent to 15 percent.

This prompted Safaricom to raise the cost of calls by 30 cents per minute, and SMS by 10 cents while rival, Zuku, increased the costs for subscribers who use the 10mbps package to Sh3,999 up from Sh3,500.

The lawmakers also rejected a plea from bankers to exclude fees and commissions earned on loans from the 20 percent excise duty.

The Kenya Bankers Association (KBA), a lobby for the lenders, had argued that imposition of excise duty on fees and commissions would raise the cost of borrowing and hurt access to credit at a time businesses and households were looking for cash to recover from the knocks of the Covid-19 pandemic.

“The committee rejected the proposal as it will negate the intended objective of reducing the tax expenditure. This will also erode the tax base,” said the National Assembly Committee on Finance and National Planning.

Parliament agreed to cut the 20 percent tax on winnings from gambling to 7.5 percent, a boost to gamblers and blow to the Treasury.

The MPs also lowered the Treasury’s proposal to reintroduce excise duty on betting to 7.5 percent from 20 percent that the State had published at end of April through the Finance Bill 2021. The Treasury had sought to reintroduce the 20 percent tax on betting stakes through the Finance Bill 2021, as it eyed billions of shillings from punters annually.

The 20 percent tax on betting stakes was introduced in 2019 but Parliament removed it last year through amendments to the Finance Act, 2020 following lobbying by betting firms.

Punters currently pay 20 percent on their winnings but the parliamentary committee reduced it to 7.5 percent, saying the current taxation regime for betting is too high and has put off investors.

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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.

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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.

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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


Cotu boss Francis Atwoli

Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.

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