The Star ­ Monday
Date: 16.06.2014
Page 46
Article size: 555 cm2
ColumnCM: 123.33
AVE: 217066.66
Tax laws to undergo changes
to expand revenue base
In a bid to enhance
tax compliance
the government
has proposed an
ammendment to the
law that will require both
local and foreign tax
payers to provide the
commissioner with up
to date information on
changes in business and
corporate structure.
n II' government has left no douhr that it is
set to review the tax laws in a bid to simplify,
:o development initiatives. In the long run, countries. Discussions on Base Erosion and
he entire economy will develop as more Profit Shifting have been rife in the air and
.xpand the revenue base as well as bring
KRA seems to have taken cue to enhance its
revenue collection.
them in line with international best practice. jobs will be created as companies tap more
The review of the VAT Acr seems ro have
been the beginning of a journey to review
.he tax laws.
The enactment of the new piece of
legislation simplified as well as expanded
he tax base. This was however marked with
i general increment in the cost of living as
most of rhe exempt and zero­rated supplies
we now taxable at the standard rate of 16
per cent.
In the same breath, rhe National Treasury
us prepared VAT regulations to provide
clarification and interpretation of key
eas of the law. This will ensure consistent
growth opportunities.
The ongoing reforms in customs
administration is set to enhance revenue
yield and eliminate leakages. The allocation
of Shl.l billion to the Kenya Narional
Electronic Window System will kick­start
a process that is set to simplify import and
export declaration. This will increase the
competitiveness of the port of Mombasa in
the region, A new Excise Duty Bill is set to
be introduced in parliament. This is poised
to be simple and modern by incorporating
international best practices.
The Income Tax Act is set to undergo a
review to ensure it is in line with international
jperationisation and enforcement of the
provisions. Addressing the issue of VAT best practices. In the meantime, the
­efnnds is long overdue. With the Kenya government has proposed an amendment on
Revenue Authority constantly complaining the definition of permanent establishment
jf inadequate allocations by Treasury and (PE) to restrict transactions between related
;et limits of the am mint thai can be refunded parties and place their local establishment at
ro each taxpayer for each tax period, a long an arm's length for tax purposes.
This is meant to deter the use of transfer
lasting solution is also set ro be developed to
pricing" schemes ro deny the government
iolve rhe issue of VAT refunds backlog.
Perhaps, allowing set­offs against other revenue to fund the budget. The coverage of
rax obligations should be considered in light the definition of a PE is likely to be expanded
A the inadequate allocations from Treasury. to loop in more foreign companies into
This will address the cashflow problems that the tax net hence expanding the tax base.
some companies have been going through
ind hence allowing them tu deploy the funds
This is in line with the global move by tax
authorities to ensure that a fair share of tax
is paid by multinationals operating in their
In a bid to enhance tax compliance, the
government has proposed an amendment
to the law that will require both local and
foreign national taxpayers to provide the
Commissioner with up ro date information on
changes in business and corporate structure.
This will lift the veil of incorporation
allowing KRA ro establish the people behind
corporate entities and hence easily detecting
possible tax avoidance measures through
change or spin­offs of corporate structures.
Unification of general and similar tax
procedures is set to ease tax administration
while reducing the cost of compliance.
This is through the introduction of the Tax
Procedures Bill that will contain uniform
procedures across three tax legislations ­
Value Added Tax, Excise Duty and Income
Tax. This is in line with international best
practice to have all the procedures that that
are general and applicable to all tax laws
contained in one law.
This follows rhe signing into law the Tax
Appeals Tribunal Act, 2014 which unifies the
appeal process of the various rax laws. The
government should ensure that adequate
stakeholders and public participation is
part of the wider review process. Through
these measures and initiatives, government is
poised to enhance its revenue collection.
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
The Star ­ Monday
Date: 16.06.2014
Page 46
Article size: 555 cm2
ColumnCM: 123.33
AVE: 217066.66
KEEN: MPs follow the budget proceeding delivered by National Treasury CS Henry Rotich in Parliament last Thursday.
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya