According to Mercy Kimalat, CEO of Association of Startup and SMEs enablers of Kenya, the proposed finance bill 2024-2025 may cripple SMEs and startups in the following ways.
In Clause 35H and H of the finance bill 2024, the removal of zero-rated status for the e-mobility e-sector goods means that any item that had been zero rated such as importation of electronic bicycles, solar, lithium batteries, electric buses will reduce investors interest in this sector due to tax to be added. The e-mobility goods will remain expensive given that there is no local supply chain for these sectors.
Removal of VAT exemption for the plant equipment used in plastic recycling plants. This will also reduction incentive for investment in this sector when the VAT exemption is removed. This will lead to increase in the cost of recycling and manufacturing of plastic recycling machines.
Introduction of exercise duty on vegetable oil at a rate of 25% will affect SMEs startups in the agro-processing sector. Many young people ‘hustling’ in this sector will face high production of their products. Bakers and others in the agro-processing industry rely on vegetable oil for their business.
According to Kimalat we are actually killing our own economy and manufacturing capacity and giving businesses from neighboring countries to flood our markets with their imports.
Introduction of ICT board to govern IT operation and determine and regulate the kinds of apps that can be developed by IT entrepreneurs an SMEs in the sector. According to the bill, IT firms will have to annually part with fees in order to run their operations in the country.
The finance bill proposes to introduce tax from 1.5% to 6% on the digital service tax. This could mean that social media platforms such as Facebook will have to increase their cost on consumers hence affecting content creator’s revenue.
