Japhet Ruto, a journalist at TUKO.co.ke, brings more than eight years of experience in finance, business, and technology, offering deep insights on economic trends in Kenya and globally.

Stakeholders providing input on the Finance Bill 2025 have urged a review of certain proposals, highlighting that many could significantly increase the cost of services they provide.

The Kenya Association of Air Operators (KAAO) noted that the bill aims to reinstate the Value Added Tax (VAT), Import Declaration Fees, and Railway Development Levy (RDL) on aircraft, parts, and maintenance services.

KAAO argued that if passed into law, the proposals would raise the cost of aviation in Kenya.

The industry players presented their views to the National Assembly Finance Committee, chaired by Molo Member of Parliament (MP) Kuria Kimani on Monday, May 26.

They said that the industry needs policy certainty and that the current frequent changes do not inspire confidence in the long term, insisting that the sector requires capital-intensive investments to thrive.

"These proposed changes threaten to unravel recent progress made and put at risk Kenya’s position as a regional leader in air connectivity, fleet modernisation, and innovation," they stated in a memorandum.

According to KAAO, the taxes also contradict the policy frameworks of the East African Community (EAC) and the International Civil Aviation Organisation.

Both bodies advocate for tax exemptions on international air transport inputs because of their extensive economic impact.

It further stated that tourism, a vital sector of Kenya's economy, will be the most negatively impacted.

"Any increase in aviation costs will have a direct impact on visitor volumes, as light aircraft play a crucial role in connecting visitors to national parks and coastal destinations, and more than 70% of international tourists arrive by air. By 2028, the government expects more than five million foreign visitors, a goal that depends on accessible, dependable air travel," they reiterated.

The domestic air travel sector is also thriving, serving as a vital link for business and leisure travellers, with forecasts predicting an increase to over six million passengers by 2028.

In related news, significant changes to Kenya's VAT system are proposed under the Finance Bill 2025.

These include the removal of certain VAT-exempt items and services and their conversion to a uniform 16% VAT rate from July 1, 2025.

By introducing Section 66A, which penalises the misuse of exempt or zero-rated items, the measure seeks to combat the abuse of VAT exemptions and expand the tax base.

Healthcare, aviation, energy, tourism, housing, manufacturing, mining, and information storage are among the industries impacted.

Among these are inputs and raw materials for local vehicle manufacturing.

Source: TUKO.co.ke