1. Debt rationalisation
There is a sustained cry from experts calling for restructuring of the country’s debt to match the life of key ongoing projects to avoid getting into a debt trap.
It recommends alternative sources of financing such as the public private partnerships.
Kenya’s debt has ballooned over the last few years with 50 per cent of the debt being foreign, and therefore the stability of exchange rates will play a big role in sustainability of these debts going forward.
Most of this debt has been expended towards big infrastructure projects whose benefits will be realized in the long term.
2.Big 4 Agenda management
Experts are recommending the creation of a national database by the Government as a reference point for national development initiatives.
The end users will refer to the database to inform planning for the Big 4 Agenda initiatives and other development programs.Accurate planning requires accurate data.
The Huduma Namba project rolled out in 2019 was meant to build and secure ‘big data’ that is necessary for planning and making informed economic decisions.
The database will also assist in planning for achievement of universal healthcare through provision of background information needed for registration for provision of universal healthcare services under the National Hospital Insurance Fund.
The same information will be easily accessible for use by relevant stakeholders in the health sector.Accurate patient identification is necessary in order to administer
proper diagnosis and agenda.
3.Taxation measures
The lack of a clear tax policy is worrying and experts suggest a long-term solid policy.Kenya’s tax statutes are littered with annual/bi-annual amendments.
Besides creating room for additional tax collection, most of these changes in tax lack a philosophical orientation.
In some instances, taxes such as betting tax which was scrapped in 2020 is now proposed to be re-introduced just one year down the line.
On minimum tax, which was introduced in the Financial Bill 2020 and subsequently this has been suspended by the High Court pending full hearing on its constitutionality.
The tax is considered by many analysts as ill-advised as it has the impact of crippling both small and large businesses, especially those businesses with high turnover but low margins, large capital outlay and those that have huge capital allowances.Experts warn that Government should re-think the practicality of this tax besides its constitutionality.
4.Value Added Tax
The Finance Bill 2021 proposes to introduce VAT on bread at a time family have lost income, businesses have collapsed, and the worst is still beckoning, yet the government find it fit to tax bread- which due to lack of an alternative has become a majority of Kenyans staple food.
At the same time,the 2021 Finance Bill proposes to change the classification for exported services from zero-rate to exempt.
This change means that suppliers of exported services will not be allowed to claim their input VAT thus making such supplies more expensive.
This is against international best practice. The proposed changes contradicts the government’s effort of implementing the Konza city dream- a dream that seeks to make Kenya Africa’s Silicon Valley.
By changing the zero-rated status of export of services, experts argue the Government is loudly pronouncing the death of Konza city dream.
5.Withholding tax exemption
The Bill proposes to scrap the legal regime for exempting companies that are in perpetual VAT refund from the withholding VAT regime.
This means that such companies will accumulate huge VAT credits/refunds for which they have to wait for a long time to utilize or they have to apply for a refund later on.
This will further complicate the vat refunds backlog since KRA has not been able to settle these in good time.
This will unnecessarily and unfairly deny businesses their rightful funds which are necessary to support their operations especially during the pandemic hence mitigate the disruption caused to our economy.
6.Private hospitals facilitated to import Covid-19 vaccines
Experts have urged the government to put in place mechanisms to allow private hospitals to import vaccines in order to compliment government efforts.
The audit firm in its pre-budget report wants the government to prioritize the vaccination program by allocating more resources for this purpose.
With the pandemic in its third stage and spreading fast, analysts are calling for an open door policy for hospitals with capacity to get vaccines from abroad to help the shortfall witnessed by Government facilities.
With no certainty as to how long it will take for the pandemic to come to an end,only countries that have initiated widespread vaccination programs are in a better position to re-open their economies fully.
7.Common reporting standards
The Finance Bill 2021 proposes to introduce regulations to govern the common reporting standards.
The Common Reporting Standards were developed by the OECD to tackle illicit flow of funds, tax evasion and improve tax transparency and compliance.
This means that offshore bank accounts for Kenyan residents will now be accessible to the KRA.
Strict sanctions have been proposed for non-compliance with reporting obligations by financial institutions. This is a very welcome proposal asit will help to address the endemic issue of corruption.
8.Country-by-country reporting
The finance Bill has proposed to have Kenyan multinationals disclose transactions in foreign jurisdictions.
This is aimed at giving visibility to Kenya Revenue Authority on tax affairs of these Kenyan multinationals in all jurisdictions they operate in.
Government needs to consider extending the CbC reporting requirements to also cover non-Kenyan multinationals.This will be one way to expand the tax bracket so as to enlarge the revenue collection by the Government.
9.VAT exemption tariff chapter 84 and 85
The Finance Act 2020 introduced VAT on machinery of tariff chapters 84 and 85.
These areheavy machinery required for our industrial success. As a result, many businesses will end up with huge input VAT credits that will result in significant VAT refund claims that are never processed and paid on time by KRA. The cost of deploying big projects will rise as a result
since businesses are now forced to borrow in order to finance VAT.This will even further slow down processes of Big projects completion and as such Government is being urged by Experts to figure out a compromise.
10.Cushion on food and fertiliser supplies
As farmers embark on planting season with the onset of the rains,experts argue that farming implements must be looked at to avoid entry of counterfeits.
Suggestions abound about cutting tax of importation so that genuine implements and crops or food get in regularly.
A lot of frustration has been endured by farmers in the past over heavy taxes in farm crops, fertilizers and appliances thus heavily impacting on food security in the country.
The Government targets to achieve national food and nutrition security and in execution of this mandate, the government needs a national database of farming households and subsequently all farmers in the country.
Achieving national food security will be largely informed by a comprehensive register of all farmers in Kenya.
