By Wakili Charles Jaika Magotzwi
The Finance Bill of Kenya 2023 has aroused significant questions and emotions among Kenyans. As provided under Chapter 12 of the Constitution of Kenya 2010 on Public Finance, the underlying principles that underscore include but are not limited to openness, accountability, public participation, shared tax burden, and an equitable finance system. Further, the state must ensure that financial proposals make special provisions for the marginalised, reinforcing the quest to ensure that its citizens benefit from financial inclusion and economic empowerment.
Financial inclusion is commonly defined as the proportion of individuals and organized groups that use financial services. It refers to a state where all gender and working-age adults have adequate access to convenient and responsible services delivered at affordable and sustainable customer costs, including credit, savings, payments, and insurance from formal providers (GPFI, 2011). [1]Financial inclusion also ensures that individuals, households, and businesses in a community have adequate access to standard financial services and products that are delivered sustainably.[2]
The Finance Bill 2023 seeks to amend various laws relating to taxes and duties to increase government revenues from taxes collected. This includes Income tax that increases gross sales from 1% to 3%; digital assets are proposed with a tax of 3% levy on the transfer charges applied during an exchange of the assets. Digital content creators, having not been left behind, are to be taxed 15% of payments made to digital content creators. Amidst the hue and cry of Kenyans and mostly those in employment, 3% housing levy deductions are proposed from the monthly payments from their ever-shrinking pay slips.
Equally, on the proposed amendments, VAT on petroleum products is augmented to 16% from the current 8%. There are increased excise duty rates, including mobile money, where Taxpayers are to deposit 20% of the tax in dispute at the KRA. Additionally, the Tax Procedures Act will no longer be operational after the Bill is passed and assented to by the President. The Miscellaneous Fees & Levies Act has been proposed to revise the import declaration fee from 3.5% to 2.5%. With the country’s cost of living and economic standing presently, with these acutely raised taxes, will financial inclusion and economic empowerment be improved in Kenya?
Financial inclusion can help. And if supported by robust policies, it can go hand in hand with financial stability. Financial inclusion empowers individuals and families, especially women and low-income earners, and well-functioning economic systems enrich whole countries. The need for economic empowerment is essential for the country’s economic recovery and growth. The proposed Finance Bill 2023 will not be a good stepping-stone for Kenya entering a Common Reporting Standard (CRS) regime if enacted. The proposal lacks a clear framework for implementing financial inclusion and, by extension, economic empowerment.
Arguably, the merits of financial inclusion are firmly rooted in economic empowerment and can be a powerful agent for strong and inclusive growth by empowering individuals and families to cultivate economic opportunities.[3]
To advance financial inclusion, as part of this commitment, the government should infuse inclusion in any proposed laws, policies, and regulations that align with the proposed Finance Bill 2023 that, includes the following;
- It addresses normative barriers to citizens’ capabilities and financial inclusion. This includes advocating for legal, policy, and regulatory reforms and supporting innovative services that empower citizens economically.
- It is modernising and improving digitally-enabled services; This includes scaling up inclusive platforms, particularly for digital payments and ID infrastructure, to promote women’s financial and economic inclusion and activity.
- It is spurring gender-inclusive product innovations; This includes reducing barriers to entry for women entrepreneurs and facilitating digital platforms for women’s leadership, entrepreneurship, and financial inclusion.
- Supporting enabling laws and policies; This includes working to remove legal and regulatory barriers to women’s access to financial services, increase the number of social protection schemes that include gender-intentional payments that spur women to use digital accounts more broadly, and measure the impact of laws and policies through the use of gender-disaggregated data.
The Finance Bill 202 and its attendant taxation proposals are unjust punishment at its best and undermine the principle that ‘the burden of taxation shall be shared fairy’ (Art,201(b)(i)) whose impact will burden Kenyans and entrench poverty which demolishes financial inclusion and economic empowerment. A wide range of literature suggests that an inclusive financial system is imperative for economic growth and sustainable development, which can be achieved through financial inclusion.[4]
Post-crisis opportunities to promote financial inclusion hinge on carefully analyzing the risks posed by the transactions of people experiencing poverty. Without such analysis, the heightened risk perception could usher in an indiscriminate restriction of innovation. In formulating financial inclusion policies, policymakers should leverage successful innovations developed by their peers that realize the benefits of financial inclusion in safe ways.[5]
In conclusion, the Finance Bill 2023 should be underpinned by constitutional principles; the population is largely financially excluded. The state must ensure they are reached, facilitated, and empowered. Access to financial services is crucial to strengthen financial sectors and domestic resource mobilization and can significantly contribute to social and economic development.
[1] https://unctad.org/system/files/official-document/ditctncd2020d6_en.pdf 17/05/2023 at 10.37 am
[2] https://innovation-entrepreneurship.springeropen.com/articles/10.1186/s13731-021-00190-4 15/05/2023 at 11:53am
[3] Empowerment Through Financial Inclusion, Address to the International Forum for Financial Inclusion by Christine Lagarde, Managing Director, International Monetary Fund
[4]https://www.researchgate.net/publication/273162458_Financial_Inclusion_A_Critical_Assessment_of_its_Concepts_and_Measurement 17/05/2023 at 10.01 am
[5] https://www.adb.org/sites/default/files/publication/156114/adbi-wp259.pdf Accessed on 17/05/2023 at 10:58 am
