NAIROBI, Kenya – Parliament has thwarted a Treasury proposal to impose a 5% withholding tax on interest earned from new infrastructure bonds, a measure expected to generate Ksh.13 billion annually.
The plan, part of the Tax Laws (Amendment) Bill, 2024, sought to end a tax exemption on such bonds that has been in place since 2009.
The rejection was spearheaded by the Departmental Committee on Finance and National Planning, whose chair, Kuria Kimani, argued that retaining the tax-free status of infrastructure bonds would stimulate investments, particularly in environmentally friendly “green bonds.”
“This is where we’re deleting the proposed withholding tax on infrastructure bonds,” Kimani said in Parliament. “This provision will encourage investment in Kenya, especially in bonds that promote environmental conservation.”
The Treasury had included the proposal as part of broader reforms aimed at raising Ksh.174 billion in additional revenue through various amendments, including the Tax Procedures (Amendment) Bill, 2024, and the Public Finance (Amendment) Bill.
However, stakeholders had raised concerns that taxing infrastructure bonds could dampen investor appetite, increase borrowing costs, and ultimately hinder the development of critical projects.
With the proposal rejected, the Treasury now faces the challenge of finding alternative revenue sources to bridge budget deficits, as it continues to grapple with increasing demands for public services and infrastructure development.
The plan, part of the Tax Laws (Amendment) Bill, 2024, sought to end a tax exemption on such bonds that has been in place since 2009.
The rejection was spearheaded by the Departmental Committee on Finance and National Planning, whose chair, Kuria Kimani, argued that retaining the tax-free status of infrastructure bonds would stimulate investments, particularly in environmentally friendly “green bonds.”
“This is where we’re deleting the proposed withholding tax on infrastructure bonds,” Kimani said in Parliament. “This provision will encourage investment in Kenya, especially in bonds that promote environmental conservation.”
The Treasury had included the proposal as part of broader reforms aimed at raising Ksh.174 billion in additional revenue through various amendments, including the Tax Procedures (Amendment) Bill, 2024, and the Public Finance (Amendment) Bill.
However, stakeholders had raised concerns that taxing infrastructure bonds could dampen investor appetite, increase borrowing costs, and ultimately hinder the development of critical projects.
With the proposal rejected, the Treasury now faces the challenge of finding alternative revenue sources to bridge budget deficits, as it continues to grapple with increasing demands for public services and infrastructure development.
