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Finance Act 2025 · The Mwango Capital Podcast

0:00
SPEAKER_03: Ladies and gentlemen, greetings from wherever you're joining us from.
0:03
It's a delight to have you as part of this conversation where
0:06
we want to take a
0:07
SPEAKER_03: deep dive into Kenya's Finance Act 2025.
0:12
SPEAKER_03: In case you don't have context around this,
0:13
the Finance Act is the piece of legislation that is designed by
0:18
Kenya's public
0:18
SPEAKER_03: finance architecture for the generation of revenue every fiscal year.
0:30
SPEAKER_03: proposals for revenue raising measures,
0:32
where we see tweaks and adjustments here and there across a
0:35
raft of pieces of tax
0:37
SPEAKER_03: legislation.
0:38
SPEAKER_03: To help me take a deep dive into this conversation on Finance Act 2025,
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SPEAKER_03: I have Fred Kimoto,
0:45
SPEAKER_03: Associate Director,
0:46
SPEAKER_03: Tax and Legal at Deloitte.
0:48
SPEAKER_03: Later on, I'll be giving them a chance to introduce themselves.
0:51
SPEAKER_03: I also have Jill Lashar, Tax Director at RSM East Africa.
0:54
SPEAKER_03: And finally, Agnes Gitao, Tax Partner at Anderson Tax Kenya.
1:00
The way we shall navigate this conversation is that we will
1:03
begin with a focus on
1:04
the changes in value added tax and the reason why we shall be
1:08
kicking off with VAT
1:10
is because a lot of the conversation on Finance Act 25 has been
1:14
around the cleanup
1:15
SPEAKER_03: of the first and second schedules of the VAT Act,
1:18
SPEAKER_03: focusing on exempt status and zero-related status.
1:22
SPEAKER_03: After that,
1:22
we shall transition into a conversation on the Tax Procedures
1:26
Act and the changes
1:27
SPEAKER_03: which are coming to amendments to that use of legislation,
1:30
another significant portion of Finance Act which elicited so
1:34
much debate in the
1:35
SPEAKER_03: public participation phase,
1:38
And we shall close with a conversation on changes to income tax
1:42
and excise tax.
1:43
SPEAKER_03: And that is how we shall be having our conversation tonight.
1:46
SPEAKER_03: At the tail end, we shall have a Q&A session.
1:49
SPEAKER_03: And that will take us to right about 9.30 p.m.
1:52
SPEAKER_03: where we shall be dialing down with closing thoughts.
1:55
SPEAKER_03: Having said the scene as such,
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I just wish to caution us that what we have seen thus far is a
2:01
special settlement
2:02
SPEAKER_03: coming from the Kenya Gazette office.
2:04
SPEAKER_03: where we have seen a special notice which came out today,
2:06
SPEAKER_03: giving us a glance into what we are seeing in Finance Act of 2025.
2:10
SPEAKER_03: And of course,
2:12
SPEAKER_03: we are only waiting to see the green copy,
2:14
which of course will guide us on what's the final position for
2:17
the Matters Finance
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SPEAKER_03: Act 2025.
2:19
SPEAKER_03: I have set the stage.
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SPEAKER_03: Now let me invite my panelists to introduce themselves.
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SPEAKER_03: Starting off with Jim Lasha.
2:25
Please tell us who you are,
2:27
which institution you're affiliated to,
2:29
and what you do there.
2:30
SPEAKER_02: Thank you, Julian.
2:31
SPEAKER_02: Good evening, everyone.
2:32
SPEAKER_02: My name is Jilna Shah.
2:33
SPEAKER_02: I'm a tax director with RSM Eastern Africa, handling tax as we speak.
2:39
SPEAKER_02: Thank you.
2:40
SPEAKER_03: Thank you very much, Jilna.
2:41
SPEAKER_03: Let's cross over to Fred Kimotho.
2:43
SPEAKER_01: Good evening, all our listeners.
2:45
SPEAKER_01: My name is Fred Kimotho.
2:46
I work with Deloitte East Africa as an associate director
2:49
looking after tax policy
2:50
SPEAKER_01: and tax controversy.
2:51
SPEAKER_01: It's a pleasure to have this conversation.
2:53
SPEAKER_01: Looking forward to an engaging one.
2:55
SPEAKER_01: Thank you.
2:56
SPEAKER_03: Thank you very much, Fred.
2:57
SPEAKER_03: And finally, let's cross over to Agnes Gitao.
2:59
SPEAKER_03: Please introduce yourself.
3:01
SPEAKER_02: Thank you, Julius.
3:02
SPEAKER_02: Good evening, everyone.
3:03
My name is Agnes Gitao,
3:05
a tax director at Anderson,
3:06
where I handle tax matters for our clients.
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SPEAKER_03: Many thanks my panelists for introducing yourselves.
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We shall be relying on your guidance and insight to help us
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shed light into nuances
3:16
SPEAKER_03: around finance act of 2025.
3:19
SPEAKER_03: So let's kick it off.
3:20
SPEAKER_03: Starting with value added tax.
3:23
One of the major changes that we saw coming at the committee of
3:26
the whole house
3:27
SPEAKER_03: stage,
3:28
and maybe just to take a step back and give context is the bill
3:31
is stable in the
3:31
SPEAKER_03: house.
3:32
SPEAKER_03: It goes to the first reading,
3:33
SPEAKER_03: second reading,
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SPEAKER_03: and then we go to the committee of the whole house where
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SPEAKER_03: We see a report coming from the Finance and Planning Committee,
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after which these amendments are taken to the floor of the
3:41
House and we go through
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SPEAKER_03: a clause by clause amendment.
3:45
SPEAKER_03: And that is where I'm starting from.
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We saw significant changes because the Finance Bill of 2025 had
3:50
come with a
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SPEAKER_03: proposed drastic cleanup of the first and second schedules.
3:54
SPEAKER_03: The first schedule dealing with VAT exempt status,
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SPEAKER_03: the second schedule dealing with zero-rated status.
4:00
We saw the National Assembly differing with the National
4:02
Treasury and saying,
4:04
SPEAKER_03: whereas we want to address the headache of tax expenditure,
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SPEAKER_03: which is a revenue we forego,
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SPEAKER_03: we still have to retain some products on zero-rated status.
4:13
SPEAKER_03: Let me start with Fred Kimoto.
4:15
SPEAKER_03: Help us understand exempt, zero-rated, and standard-rated.
4:19
And were you surprised by the U-turn we have seen when it comes
4:22
to this cleanup,
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Fred?
4:25
SPEAKER_01: Thank you.
4:25
SPEAKER_01: Maybe to start us off in terms of what exempt means,
4:28
SPEAKER_01: what's related means and what taxable at 16% means.
4:31
SPEAKER_01: Basically,
4:32
it means that if you're talking about taxable sales from a VT
4:34
perspective is that
4:35
SPEAKER_01: every sale will be charged at the rate of 16%,
4:38
which then means that it has to be loaded on the price of the
4:41
good or the service.
4:42
From a zero-rated perspective is that you apply a zero-rate on
4:45
the value of the good.
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SPEAKER_01: And of course, for exempt, it means that VAT is not applicable.
4:49
The only main difference between exempt and zero-rated is that
4:52
for exempt,
4:53
SPEAKER_01: then you are not able to claim the input VAT.
4:55
And that's why you will hear the argument that if a good is
4:58
made to be exempt,
4:59
SPEAKER_01: it becomes a bit more expensive than a zero-rated good.
5:03
And you'll actually see quite a number of goods in the exempt
5:06
schedule compared to
5:07
SPEAKER_01: the zero-rated.
5:08
Because also from a zero-rated perspective,
5:10
which is something that Julian has mentioned,
5:12
It also means that the government has to refund the suppliers
5:15
who are supplying
5:16
SPEAKER_01: generated goods,
5:17
SPEAKER_01: the input VAT that they incurred,
5:19
SPEAKER_01: the excess input VAT arising from such supplies.
5:21
SPEAKER_01: So that's the main decision between the three.
5:23
SPEAKER_01: Now, on to your question in terms of whether we were surprised or not.
5:27
SPEAKER_01: First of all,
5:28
SPEAKER_01: it's good to mention that if you look at just the first schedule alone,
5:31
SPEAKER_01: and more specifically,
5:32
SPEAKER_01: the first part,
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SPEAKER_01: it has more than 150 goods that are listed there to be exempted.
5:37
SPEAKER_01: If you go to zero-rated schedule,
5:39
you'll actually realize that it has more than 35 items that
5:41
we're looking at in
5:43
SPEAKER_01: terms of them being zero-rated.
5:45
SPEAKER_01: Now,
5:45
there's this broad pronouncement under the national tax policy
5:48
and the medium-term
5:48
SPEAKER_01: revenue strategy in terms of the argument that for zero-rated,
5:53
what the government aims to do is to ensure that zero-rated are
5:56
only restricted to
5:58
SPEAKER_01: exported goods and services.
6:00
SPEAKER_01: While exemption,
6:00
it was also expected to be limited to some essential goods and
6:04
services as well.
6:04
SPEAKER_01: The question then,
6:06
given that period of time-leveling strategy was supposed to
6:08
give us guidance as far
6:10
SPEAKER_01: as tax changes are concerned within a period of three years,
6:12
sometimes I ask myself whether we set ourselves to failure in
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terms of are we
6:17
saying that the 35 goods and services that are listed under the
6:20
second schedule for
6:21
SPEAKER_01: 08 would have been removed,
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SPEAKER_01: all of them,
6:23
SPEAKER_01: and maybe moved two or three within a period of three years?
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SPEAKER_01: And I think the answer is no.
6:28
SPEAKER_01: And that's why for me,
6:29
I am not surprised when I saw some of these items being
6:33
reversed by Parliament.
6:34
SPEAKER_01: Number one,
6:35
because there was a lot of public outcry as far as removing
6:38
goods from exempt to
6:39
SPEAKER_01: standard rated,
6:40
SPEAKER_01: because obviously it meant that the time was going to go up.
6:44
SPEAKER_01: And of course,
6:44
SPEAKER_01: number two,
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SPEAKER_01: which is also very fundamental,
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I think is a choice of the goods that we did choose to remove
6:50
from this category.
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SPEAKER_01: If,
6:51
SPEAKER_01: for example,
6:51
SPEAKER_01: look at the items that are being removed from exempt to 16%,
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you had things like taxable goods on construction of tourism
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facilities and
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SPEAKER_01: recreation parks,
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SPEAKER_01: things to do with construction and equipping of hospitals,
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SPEAKER_01: local manufactured passenger vehicles,
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quite a number of items that you would think by them having
7:08
been introduced and the
7:09
SPEAKER_01: exemption,
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SPEAKER_01: there was a bit of thinking,
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SPEAKER_01: either in terms of sparring the growth in some of those sectors
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SPEAKER_01: or other motivation.
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So the question then would be,
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is the government then doing away with some of those things?
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SPEAKER_01: And of course,
7:19
SPEAKER_01: when you go to the related,
7:20
SPEAKER_01: quite a number of things there,
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SPEAKER_01: things like local assembly of mobile phones,
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SPEAKER_01: which had actually been introduced by the Finance Act of 2022,
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SPEAKER_01: electric bicycles,
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SPEAKER_01: solar and steam virtualists,
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SPEAKER_01: Finance Act of 2023.
7:32
SPEAKER_01: So two things to note.
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So in terms of the items that were being moved from exempt to
7:37
standard rated and
7:38
SPEAKER_01: from related to exempt,
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SPEAKER_01: You actually notice some incoherence with the global government policy.
7:44
Talk of the net zero emissions that the government is aiming to
7:48
achieve by 2050.
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SPEAKER_01: So you then ask yourself,
7:51
by the government removing some of these items in the category
7:54
they are in,
7:54
is it that they are contradicting themselves in terms of
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ensuring that we achieve
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SPEAKER_01: some of these particular objectives?
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SPEAKER_01: But the other one,
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SPEAKER_01: which is fundamental to me as well,
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is the fact that some of these goods had just been introduced
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barely 24 months ago.
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SPEAKER_01: Quite a number of changes,
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SPEAKER_01: especially for zero retail,
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including some of the things like electric bicycles had been
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introduced by the
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SPEAKER_01: finance act of 2023.
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SPEAKER_01: Then the question would be,
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is it that we have done a bit of study and realized that these
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goods should no
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SPEAKER_01: longer be under zero retail within such a short period of time?
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SPEAKER_01: So I think, so for me, I'm not surprised.
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SPEAKER_01: I think then we needed to retain them.
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SPEAKER_01: measure it to ensure that we don't affect the health sector,
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SPEAKER_01: which is some of the areas that these items are affecting,
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SPEAKER_01: agriculture and also the clean energy agenda.
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SPEAKER_01: But we hope maybe progressively we will be able to clean up as expected.
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But I think it should be more informed by policy rather than
8:46
just committing to
8:48
some of the pronouncements that have been made in the past
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without necessarily
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SPEAKER_01: considering some of the bigger or larger notification of those movements,
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SPEAKER_01: injurians.
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SPEAKER_03: Many thanks, Fred Kimothoff.
8:58
And what he has said is just telling us that if you look at
9:00
Finance Bill 25,
9:01
SPEAKER_03: the draft that we saw earlier,
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SPEAKER_03: and you compare with Finance Acts 25,
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SPEAKER_03: critically,
9:05
SPEAKER_03: paragraphs 155 to 164 were dropped.
9:08
SPEAKER_03: And that means that pharmaceutical inputs and raw materials,
9:12
SPEAKER_03: transportation of sugar cane from farms to many factories,
9:15
SPEAKER_03: locally manufactured phones,
9:17
SPEAKER_03: solar and lithium-ion batteries,
9:18
SPEAKER_03: electric buses,
9:20
SPEAKER_03: and tea and coffee packaging material remain VAT zero rated.
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The implication here is that the manufacturers will be able to
9:28
claim the input VAT
9:29
SPEAKER_03: component in their production process.
9:31
SPEAKER_03: Let me cross over to Jilna with a different perspective on this.
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SPEAKER_03: Jilna, at the core of this, do we fundamentally have a policy conundrum?
9:38
SPEAKER_03: Because if you go back to the VAT Act of 2013 and the build-up to it,
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SPEAKER_03: the reason why we had the conversation around the VAT Act of 2013 was
9:47
was because we had the very problem we are dealing with right
9:50
now in terms of too
9:51
SPEAKER_03: many goods being exempt,
9:52
SPEAKER_03: too many being zero-rated,
9:54
SPEAKER_03: and we needed to do cleaner.
9:55
SPEAKER_03: And we seem to have regressed over the last 12 or so years.
10:00
And Treasury argues that we have a disingenuous problem in the
10:03
industry because 30%
10:03
SPEAKER_03: of all claims in terms of VAT refunds are fraudulent.
10:09
SPEAKER_03: That is the National Treasury.
10:10
SPEAKER_03: That is not more.
10:11
SPEAKER_03: Do we have a policy problem here, Jelena?
10:14
SPEAKER_02: Yes, I think we do, because we are also not providing any stability.
10:19
SPEAKER_02: If we look at from 2013 till now,
10:22
SPEAKER_02: even if you look at the last one,
10:23
SPEAKER_02: which was up to 2023,
10:25
SPEAKER_02: that's 10 years.
10:26
SPEAKER_02: Over the 10 years,
10:28
SPEAKER_02: you can barely recognize the original VAT Act that we had,
10:32
SPEAKER_02: which was the 2013.
10:33
And remember,
10:34
a lot of thought had been put when that Act was actually done.
10:39
SPEAKER_02: And over the years, I could see a lot of lobbying or you name it.
10:43
SPEAKER_02: Every year, there's a change.
10:45
SPEAKER_02: In fact,
10:46
some industries have seen their products going from exempt to
10:49
zero to 16% back to
10:52
SPEAKER_02: exempt.
10:53
SPEAKER_02: So it's even making compliance, I think, very difficult for taxpayers.
10:57
And to an extent,
10:58
it causes an issue of,
11:00
I would use the word,
11:02
erroneous claims.
11:03
SPEAKER_02: I know you've used the term,
11:05
the National Treasury has said that there are certain refund
11:08
claims which are
11:09
SPEAKER_02: leading to these fraudulent claims.
11:11
SPEAKER_02: I don't know how much of that I would use the term fraudulent.
11:14
SPEAKER_02: That's a rather strong term.
11:16
But could that also be arising partly from the fact that people
11:20
can also be non-compliant?
11:22
SPEAKER_02: Remember,
11:22
people might not even be aware that there is a formula that
11:25
you're supposed to use
11:26
SPEAKER_02: when it comes to claiming of VAT,
11:28
SPEAKER_02: like your 9010 formula.
11:31
SPEAKER_02: For example,
11:32
SPEAKER_02: there might be an issue of a genuine case of,
11:35
SPEAKER_02: I don't know,
11:35
SPEAKER_02: I've bought from my supplier.
11:37
SPEAKER_02: I don't know whether he has paid the tax.
11:39
SPEAKER_02: So that's the challenge I feel taxpayers are having.
11:42
Although there is the argument of,
11:44
I think it's called the missing trader,
11:45
right?
11:46
That's been the ongoing reason why the National Treasury is
11:49
saying or CRA is saying
11:50
SPEAKER_02: that they are these fraudulent claims,
11:52
SPEAKER_02: I would say.
11:53
SPEAKER_02: But I don't know if that's the correct term.
11:55
SPEAKER_02: I cannot verify the claim.
11:58
SPEAKER_02: And also remember, there is the refund audits that CARE does.
12:01
SPEAKER_02: I think that should be enough.
12:02
SPEAKER_02: And the whole fact that now we are moving towards digitalization,
12:06
I propose that should avoid this whole issue of incorrect
12:09
claims because now
12:10
there's visibility on the other side very quickly because of
12:14
real-time information
12:15
SPEAKER_02: sharing.
12:16
SPEAKER_02: that whether there is a fraudulent claim or the likes of such sort.
12:20
SPEAKER_02: But I think in terms of a VAT cleanup,
12:22
SPEAKER_02: Julian,
12:22
I would say it is very much needed because we just need a
12:26
stable regime for
12:28
SPEAKER_02: investors.
12:28
SPEAKER_02: Right now,
12:29
SPEAKER_02: to tell an investor that what they're planning to supply,
12:32
SPEAKER_02: one year it's in,
12:33
SPEAKER_02: one year it's not in exempt,
12:35
SPEAKER_02: it's moving to zero rate,
12:36
SPEAKER_02: and it's also causing a bit of uncertainty whether they should come here,
12:41
SPEAKER_02: invest,
12:41
SPEAKER_02: because how is one supposed to determine?
12:43
SPEAKER_02: In fact, we have found...
12:45
SPEAKER_02: A lot of areas where these errors are occurring in this instance.
12:49
SPEAKER_02: So I think, yes, we do have a problem and it needs to be.
12:53
SPEAKER_02: And everything that comes in, remember, we have a national policy.
12:56
SPEAKER_02: What is the actual agenda of where are we headed?
12:59
SPEAKER_02: Which sector are we planning to promote?
13:01
SPEAKER_02: Right now, it's all over the place.
13:03
SPEAKER_02: If it's looking at...
13:04
manufacturing then let's work towards which sectors are we
13:07
planning to grow right
13:08
now i see no clarity at all where the economy in terms of where
13:13
are we headed which
13:14
sector are we promoting which will internally lead to that
13:17
growth that we are
13:18
seeking and if that's the case let's incentivize those sectors
13:22
but i feel right now
13:23
it's all over the place we're just trying to i think clean up
13:26
anything even this
13:27
SPEAKER_02: act was supposed to be a cleanup
13:29
SPEAKER_02: I don't see having achieved that still, based on what we have just seen.
13:34
SPEAKER_02: It's, again, more sector-specific and just a few sectors, to be honest.
13:38
SPEAKER_02: Like you'll see,
13:39
SPEAKER_02: the mosquito repellent sector has been affected,
13:42
SPEAKER_02: and the Kenya Defence Forces,
13:44
SPEAKER_02: for example,
13:45
SPEAKER_02: those are the ones I think they've tried to target,
13:47
SPEAKER_02: and the tea sector.
13:48
SPEAKER_02: So that's my comment there.
13:50
SPEAKER_02: Thanks, Julian.
13:51
SPEAKER_03: Thank you, Jilla.
13:52
And just to highlight that when Jilla talks about the formula
13:55
to be used for
13:57
SPEAKER_03: claiming,
13:58
SPEAKER_03: she is actually referring to Section 17 of the VAT Act.
14:01
SPEAKER_03: If you go there, you'll see the apportionment formula.
14:03
SPEAKER_03: And when you had the Tax Laws Amendment Act of 2024,
14:06
SPEAKER_03: one of the subjects that we had a lot of debate on was the subject of the
14:10
SPEAKER_03: apportionment formula.
14:12
SPEAKER_03: Crossing over to Agnes,
14:13
and as you comment on whether we have a policy predicament here
14:17
from a VAT
14:18
SPEAKER_03: architecture standpoint,
14:19
one of the things which really stood out here was the
14:22
introduction of Section 66A,
14:24
empowering the authority with the clawback powers in the event
14:28
that there's a
14:29
suspected abuse of the preferential rates of exempt status and
14:34
zero-rated.
14:36
SPEAKER_03: What is that?
14:37
SPEAKER_03: What do you make of it?
14:38
SPEAKER_03: Is it a step in the right direction?
14:40
SPEAKER_02: Yes,
14:40
the Finance Act now provides that any entity or taxpayer who
14:44
had been given exempt
14:45
SPEAKER_02: status of a preferential rate and uses it for inconsistency.
14:50
SPEAKER_02: Transactions,
14:51
here it has the powers to come back and claim back the VAT at
14:55
the standard rate,
14:56
SPEAKER_02: at the time of disposal,
14:58
SPEAKER_02: at the time when you committed the inconsistent transaction.
15:01
SPEAKER_02: I think that is a good move and towards the right direction.
15:05
SPEAKER_02: And especially when now we are talking about 30%,
15:08
SPEAKER_02: as you mentioned,
15:09
SPEAKER_02: VAT refund cases being seen to be fraudulent.
15:12
SPEAKER_02: As much as we cannot verify that information now,
15:15
SPEAKER_02: we do know there has been a lot of challenges with VAT refunds,
15:19
SPEAKER_02: both on the side of taxpayers and on the side of here,
15:21
whereby there has been a long period whereby taxpayers submit
15:25
all the required
15:26
SPEAKER_02: documents in their view and still
15:28
SPEAKER_02: do not get their refunds approved,
15:30
SPEAKER_02: or even in situations where they get their refunds approved,
15:33
SPEAKER_02: take a long time to receive the fund.
15:36
As we are seeing this move or this thought that there are
15:39
fraudulent application of
15:41
SPEAKER_02: VAT refunds,
15:42
SPEAKER_02: it's a good law for us to have in place.
15:44
SPEAKER_02: that will cater for that so that the people who are using inconsistent or
15:48
fraudulent transactions to claim for VAT refund do not expose
15:52
or deter people whose
15:53
claims are valid and legitimate from having their VAT refund
15:57
claims approved from
15:58
SPEAKER_02: the KRA side.
16:00
SPEAKER_02: And just to mention also on the different changes we are having,
16:03
SPEAKER_02: and especially the changes moving year on,
16:05
SPEAKER_02: year out.
16:06
SPEAKER_02: The rates changing starts with it being standard rated,
16:09
SPEAKER_02: then comes to zero rated,
16:11
SPEAKER_02: after some time goes to exempt.
16:12
SPEAKER_02: I do agree with Jill now that this cost is confusion.
16:16
to our taxpayers and even worse for investors who would want to
16:20
come and start up
16:21
SPEAKER_02: their businesses here in Kenya.
16:22
SPEAKER_02: For example,
16:23
SPEAKER_02: I would assume before an investor comes,
16:25
they'd want to do a strategic plan or a survey of the factors
16:29
that are going to
16:30
affect their business and even have a budget or I would say a
16:33
projection of the
16:34
profits or by when they would expect for them to break even in
16:37
their investments
16:38
SPEAKER_02: and all.
16:39
SPEAKER_02: So if by the time they are making a decision to come and invest in Kenya,
16:43
SPEAKER_02: something such as the raw materials on mosquito nets,
16:47
SPEAKER_02: zero-rated,
16:48
SPEAKER_02: as it were before this Finance Act of 2025,
16:52
SPEAKER_02: and then that changes to exempt.
16:54
It means they will no longer be able to claim the expenses that
16:57
they incur in
16:58
SPEAKER_02: production of such mosquito nets.
17:00
SPEAKER_02: So it's good that we have multiple laws or multiple provisions.
17:05
SPEAKER_02: And as Jilna was alluding, we can have them sector-based.
17:08
Can we know that if I invest in this sector,
17:11
I will be able to expect such a rate.
17:14
SPEAKER_02: And even if it were a period of time,
17:15
SPEAKER_02: let's say five years,
17:17
so that it also enables businesses to be able to operate and go
17:21
on with what they
17:22
SPEAKER_02: intended from the onset when they started the investment process.
17:26
SPEAKER_03: Agnes, allow me to just jump onto the point you mentioned there.
17:28
SPEAKER_03: On Section 66A,
17:29
SPEAKER_03: because I take a different view,
17:30
because there is no guide as to what will be the procedure of
17:34
the Revenue Authority
17:34
SPEAKER_03: arriving at the potential abuse by a taxpayer.
17:37
Don't you see that as a potential leeway for overreach by the
17:40
authority,
17:40
Agnes?
17:41
SPEAKER_02: Yes,
17:41
SPEAKER_02: Julian,
17:42
there are possibilities that there could be misuse of that
17:45
provision to even punish
17:46
SPEAKER_02: maybe taxpayers who are still doing the right thing.
17:49
SPEAKER_02: But the good thing is that with such a provision,
17:51
it also helps to deter many taxpayers who may be using the
17:55
fraudulent method to
17:57
SPEAKER_02: claim or to have their goods at lower or preferential VAT rates.
18:01
And I think maybe what we'd need further on that just to guide
18:04
the provision of Section 66 is
18:07
probably guidelines on how the review will be done by the
18:10
theory or the parameters
18:12
that will be used to be able to determine what is it that was
18:15
inconsistent or what
18:17
is it that was misappropriately used when claiming or
18:21
conducting your businesses at
18:23
SPEAKER_02: either zero rated or exempt status.
18:26
SPEAKER_03: Thank you, Adnes.
18:27
I'd like us to close our conversation on VAT and just throw an
18:30
open question to the floor.
18:31
SPEAKER_03: Either Jill or Bradwick, you can take it.
18:34
If you look at the MTRS by now,
18:35
we should have seen the VAT rate coming down.
18:37
SPEAKER_03: We should have seen the threshold being bumped up.
18:40
Considering the limited window we now have left for the
18:42
implementation of the
18:43
SPEAKER_03: medium-term revenue strategy,
18:45
do you see these proposals ever materializing or is this
18:47
something which now we're
18:48
SPEAKER_03: just talking about?
18:49
SPEAKER_03: Brad, you can go first.
18:51
SPEAKER_01: Julian, thanks for that question.
18:52
SPEAKER_01: You will remember my comment area.
18:54
I did mention that sometimes I think we set ourselves for
18:57
failure when we came up
18:58
with a medium-term level strategy because we do not appear to
19:01
have little thought
19:02
SPEAKER_01: through some of the proposals that we put in there.
19:04
SPEAKER_01: Actually, not proposals because they are already in force.
19:07
SPEAKER_01: Because when you say,
19:07
SPEAKER_01: for example,
19:08
you reduce the corporate income tax rate from 30% to 28% by
19:12
this and that date,
19:13
SPEAKER_01: you talk about the threshold,
19:13
SPEAKER_01: you talk about the VAT also reducing from 16% to 14%.
19:18
You then wonder whether there was a bit of research that
19:20
informed those particular
19:21
SPEAKER_01: pronouncements.
19:22
Because what we have heard from the cabinet secretary in charge
19:25
of National
19:25
SPEAKER_01: Treasury,
19:25
SPEAKER_01: and I'm sure Julian's you have heard him speak about it as well,
19:28
is that these proposals were actually there in the finance bill
19:31
when it was being
19:32
SPEAKER_01: considered by National Treasury.
19:34
SPEAKER_01: But when the simulations were done,
19:35
SPEAKER_01: it was noted that the impact,
19:37
SPEAKER_01: the revenue impact was going to be very major.
19:40
There was then the thinking that we should shelf the idea of
19:43
using the VAT rate,
19:44
for example.
19:45
SPEAKER_01: Also,
19:45
SPEAKER_01: the view of the Piazuan birds,
19:47
SPEAKER_01: I think there has been a conversation that they should be reviewed.
19:50
The conversation was that it was going to have a very huge
19:52
impact on the revenue.
19:54
You then wonder whether that impact had not been foreseen when
19:57
the medium-term
19:58
SPEAKER_01: Lebanon strategy was being drafted.
20:00
SPEAKER_01: But having said that,
20:01
I think the reason we have been given by the SEERS is that
20:04
there is a lot of
20:05
measures that have been proposed or that are being implemented
20:09
by the Lebanon
20:09
SPEAKER_01: Authority.
20:10
So I think what the government is doing is a wait-and-see
20:12
approach in terms of
20:14
whether those administrative measures that have been listened
20:17
and been introduced,
20:18
SPEAKER_01: including things like E-teams,
20:19
will bear the fruit that they're expected to bear so that then
20:22
there's a bit of
20:23
SPEAKER_01: upsurge of the revenue.
20:24
SPEAKER_01: And as such,
20:25
SPEAKER_01: when you eventually reduce the VAT rate,
20:27
SPEAKER_01: for example,
20:28
there is going to be a compensation of some sort so that then
20:31
you don't reduce the
20:32
VAT rate and yet also the administrative measures have not yet
20:36
yielded the fruits
20:37
SPEAKER_01: that they were supposed to yield.
20:38
SPEAKER_01: So I think that is what has been told to us.
20:40
SPEAKER_01: But having said that,
20:41
I do think that it is not good for us as a country to pronounce
20:45
quite a number of
20:46
significant things that we intended to do as far as our tax
20:49
policy is concerned.
20:51
Then we start back checking and giving other reasons as to why
20:53
we are not able to
20:54
SPEAKER_01: implement them.
20:55
SPEAKER_01: We are now left with one year.
20:57
We just hope that we can see most of the changes coming into
20:59
effect next year.
21:01
I truly believe that some of them will come into effect,
21:04
although maybe not of them.
21:06
SPEAKER_01: Also considering that we'll be going back to the bottom by 2027,
21:09
so it's likely that some of those reduction of rates will come
21:13
in handy in terms of
21:14
SPEAKER_01: convincing the common man.
21:16
SPEAKER_03: Thank you, Fred, for your thoughts on VAT.
21:18
SPEAKER_03: And I'd like us to close our discussion on VAT at that point.
21:20
SPEAKER_03: There's a lot more on changes to the value of the Tax Act piece.
21:24
You can interact with the Finance Act 5 and see what is exactly
21:28
provided best.
21:28
SPEAKER_03: Switching gears to the Tax Procedures Act.
21:31
SPEAKER_03: Vilna, I'm sure we were all excited to see two provisions being dropped.
21:36
One was granting the Revenue Authority access to Fed Secrets
21:39
and personal data.
21:41
Another one was on issuance of agency notices despite appeals
21:44
by taxpayers.
21:45
SPEAKER_03: They were dropped,
21:46
but just speak to us in terms of the significance of them being
21:49
dropped from the
21:49
SPEAKER_03: Finance Act.
21:50
SPEAKER_02: I think the issue of trade secrets and personal data,
21:54
there was a lot of outcry around the same because some of the
21:57
industries have a lot
21:58
SPEAKER_02: of sensitive data.
22:00
So we were not sure what was the reason of the KRA also having
22:04
such personal information.
22:06
SPEAKER_02: how the data would be obviously stored or captured.
22:09
SPEAKER_02: And then what was the use of that data in the first place?
22:12
SPEAKER_02: Because it's so sensitive.
22:13
SPEAKER_02: And then also trade secrets.
22:15
We don't know who's going to be handling that with the utmost
22:18
care that it needs.
22:19
So I think that has been one of the biggest wins,
22:22
I would say,
22:22
at least in the act.
22:24
SPEAKER_02: that we have seen and also for the agency notices,
22:26
it would have become a bit of you have to pay to play the game
22:30
type of a situation
22:31
if we had these agency notices issue there because enforcements
22:36
and the likes would
22:37
SPEAKER_02: be quite rampant as we can see.
22:39
So the fact that now at least I can appeal without that stress
22:43
of having to put
22:44
SPEAKER_02: money aside because some of these assessments,
22:46
SPEAKER_02: as we have seen Julian's in the past,
22:49
SPEAKER_02: I'm not even making sense.
22:50
SPEAKER_02: It's not even the turnover of a company.
22:52
And what we are seeing lately is some really rampant
22:56
assessments that are being given by Carey.
22:58
SPEAKER_02: So it would go a long way for a taxpayer.
23:01
At least they get a chance to fight the case to whichever level
23:05
that they want to
23:07
SPEAKER_02: and dispute for a taxpayer.
23:08
SPEAKER_02: It's important that they get a chance to fight their ground.
23:11
SPEAKER_02: I know on the other side,
23:13
SPEAKER_02: it was that because people don't want to pay,
23:15
SPEAKER_02: they'll continue fighting us.
23:17
SPEAKER_02: It could be 50-50,
23:18
SPEAKER_02: as we have seen in terms of the cases at the moment,
23:21
SPEAKER_02: but 50,
23:21
SPEAKER_02: maybe one by carry,
23:23
SPEAKER_02: 50 by the taxpayer.
23:24
But a taxpayer still has to have a fair right to go and fight
23:30
in any assessment.
23:31
So I think by having this agency notices issue drop,
23:34
it will help the taxpayer for sure.
23:37
Although it's not in line,
23:38
other countries in our neighboring countries are doing it.
23:40
SPEAKER_02: I don't know,
23:40
SPEAKER_02: maybe it's only a matter of time,
23:42
SPEAKER_02: maybe till we play catch up,
23:43
SPEAKER_02: but at least for now,
23:44
SPEAKER_02: it's a big win.
23:45
SPEAKER_02: Thank you.
23:47
SPEAKER_03: And that was my quick ride,
23:48
SPEAKER_03: Jilna,
23:48
SPEAKER_03: because if you look recently,
23:49
SPEAKER_03: Uganda just introduced the 30% mandatory deposit going for an appeal.
23:53
And there's a sense in which across the region that perhaps an
23:56
authority to table
23:57
SPEAKER_03: this argument,
23:58
there is a prevalence of what they call frivolous appeals and
24:02
petitions by
24:03
SPEAKER_03: taxpayers.
24:03
SPEAKER_03: Does that argument fly for you, Jilna?
24:05
No,
24:06
it doesn't because I feel it's more the frivolous assessments,
24:09
I would call it.
24:10
SPEAKER_02: If you look at it from experience,
24:13
SPEAKER_02: we found even an assessment being more than the turnover of a company.
24:17
SPEAKER_02: Like, how does that work?
24:18
SPEAKER_02: How can a tax assessment be higher than even a turnover of a company?
24:22
SPEAKER_02: It just doesn't make sense.
24:24
SPEAKER_02: So to me, it could go both ways.
24:26
Yes,
24:26
where there's a genuine case of serious issues by the taxpayer,
24:30
then fair enough.
24:31
SPEAKER_02: But how much of it,
24:33
SPEAKER_02: because of the fact that now we are on e-teams and everything,
24:35
SPEAKER_02: and then this whole digitalization,
24:37
SPEAKER_02: how much can a taxpayer also be not paying taxes?
24:40
SPEAKER_02: There's so much more visibility, which now the revenue authority has.
24:44
SPEAKER_02: So in my view,
24:45
SPEAKER_02: I don't think that statement would be accurate,
24:48
SPEAKER_02: as I would say,
24:49
SPEAKER_02: from the other side.
24:51
SPEAKER_03: Many thanks for your thoughts on those two provisions,
24:53
SPEAKER_03: which delightfully were dropped from Finance Act 25.
24:56
SPEAKER_03: Admes,
24:56
SPEAKER_03: from my reading,
24:58
Section 47.1 seems to have been amended to permit the set-off
25:02
of refunds against
25:03
SPEAKER_03: import VATQ.
25:05
Help us understand why this is a significant development and
25:09
what it means for taxpayers.
25:11
SPEAKER_02: Yes,
25:12
SPEAKER_02: the TPA,
25:13
the Tax Procedures Act has provided that you can now offset
25:17
your taxes instead of
25:18
claiming your VAT on imports or offsetting it against only your
25:22
output VAT.
25:23
SPEAKER_02: You can also claim to offset it against other taxes.
25:27
SPEAKER_02: This is a good move and especially for companies that have
25:30
huge VAT credits arising from import of purchases because it
25:34
then would enable them
25:36
to manage their cash flows because in an instance whereby there
25:40
is a huge import,
25:41
SPEAKER_02: for example,
25:41
SPEAKER_02: companies that would require to have a huge setup for them to start their
25:46
SPEAKER_02: businesses,
25:47
SPEAKER_02: giving,
25:47
SPEAKER_02: in this case,
25:48
SPEAKER_02: maybe a manufacturing
25:50
It means they would have maybe a very huge input to make and
25:53
there's that have a
25:54
huge VAT input credit and now allowing them to offset other
25:58
taxes against it would
25:59
help them manage cash flow and probably be able to focus on
26:03
other operations of the
26:04
SPEAKER_02: business on the onset.
26:07
The good thing about this provision is that most of the time
26:10
input or verification of
26:12
VAT credits that arise from imports most of the time is usually
26:16
a bit cleaner
26:17
SPEAKER_02: compared to other input VAT credits that may arise from local purchases.
26:22
So I feel like it's a good move that the KRA has decided or the
26:25
law has decided to
26:27
bring in this provision because it's going to support many
26:30
businesses and help them
26:32
SPEAKER_02: manage their cash flows.
26:33
SPEAKER_02: And also it's a provision that does not come with huge savings.
26:37
SPEAKER_02: and especially procedural,
26:38
SPEAKER_02: I would say,
26:38
verification processes just to determine whether the input VAT
26:42
being claimed is
26:43
SPEAKER_02: legitimate or not.
26:45
SPEAKER_03: Certainly,
26:45
that was quite a breath of fresh air being seen coming through
26:48
the Finance Act of
26:49
SPEAKER_03: 2025.
26:49
SPEAKER_03: Fred,
26:51
we have seen two instances where the law is being amended
26:54
clearly provide that the
26:56
National Treasury has a six-month window within which to
26:58
provide regulations for
27:01
SPEAKER_03: one,
27:01
SPEAKER_03: advanced pricing agreements,
27:03
SPEAKER_03: and two,
27:04
SPEAKER_03: significant economic presence tax,
27:05
help us understand why we are having this six months being
27:09
actually embedded in the
27:11
SPEAKER_03: law.
27:12
SPEAKER_01: Good well, Julians.
27:13
And maybe if you allow me just to add a few comments on what
27:15
Agnes has commented on.
27:17
You would recall that the Tax Amendment Act of 2024 did amend
27:22
Section 47 and
27:23
SPEAKER_01: included something called input tax.
27:25
SPEAKER_01: So what is happening, Julians?
27:26
You have players in the sector who actually do a lot of import
27:30
and they also do a lot of export.
27:31
SPEAKER_01: So they end up having a lot of decrees,
27:34
SPEAKER_01: which they are then,
27:35
because of the constraints from the government in terms of
27:37
giving them the actual
27:38
SPEAKER_01: cash,
27:39
SPEAKER_01: The refunds remain with the KRA for a long time,
27:42
SPEAKER_01: because I hear like for VAT,
27:43
SPEAKER_01: I think the maximum amount you can get per month,
27:45
SPEAKER_01: I don't know whether I can replace the taxpayer,
27:47
SPEAKER_01: is like $30 million.
27:48
You can imagine if you have a billion in form of VAT refunds,
27:51
or say even $500 million.
27:53
SPEAKER_01: So it then means that you've got to wait for a very long time.
27:55
SPEAKER_01: And remember, this number is piling up every year.
27:58
The options that are left in leading Section 47 is that you can
28:02
only then utilize
28:03
SPEAKER_01: that in terms of offsetting against other taxes.
28:06
SPEAKER_01: The ones that the KRA had acknowledged earlier,
28:09
SPEAKER_01: Majority the payers you earn, your domestic VAT.
28:12
SPEAKER_01: Another thing like withdrawing tax and withdrawing VAT.
28:15
But VAT on goods imported was specifically not being allowed in
28:19
terms of the offset.
28:20
So you have companies that even when they try to utilize the
28:24
offset option,
28:25
SPEAKER_01: Because of the linear taxes that they are paying on this other side,
28:28
SPEAKER_01: they still ended up having a lot of money stuck with the government.
28:32
And that's the reasoning then to say,
28:33
can we also bring VAT on imported goods?
28:37
SPEAKER_01: So then these companies that are heavily on imported,
28:39
SPEAKER_01: for example,
28:40
SPEAKER_01: raw materials,
28:41
SPEAKER_01: and they're carrying huge VAT,
28:42
SPEAKER_01: they don't end up paying VAT on raw materials when they import,
28:46
SPEAKER_01: yet the government has a lot of cash that they are still holding.
28:49
So when it was introduced last year,
28:51
there was a technical hitch in terms of what input tax is.
28:55
SPEAKER_01: And as a result, the government never implemented it in the system.
28:58
SPEAKER_01: But we hope now with the credit that has been provided as Act 47,
29:02
the government will enable taxpayers to be able to utilize
29:05
their refund that is
29:06
SPEAKER_01: already approved against VAT on imported goods.
29:09
SPEAKER_01: I hope we get there.
29:11
SPEAKER_01: Now,
29:11
SPEAKER_01: moving on,
29:12
SPEAKER_01: in terms of the six months,
29:14
SPEAKER_01: something is almost laughable here,
29:15
SPEAKER_01: Julian,
29:16
because you realize that we are saying that we will give the
29:20
government six months
29:22
SPEAKER_01: to provide regulations for SEPT or Significant Economic Presence Tax.
29:26
SPEAKER_01: From the time Significant Economic Presence Tax was actually introduced,
29:29
SPEAKER_01: which was on 27th of December of 2024,
29:31
SPEAKER_01: which then technically means that as we speak,
29:34
SPEAKER_01: we should have those regulations.
29:35
They're actually time bad already because we are only six
29:38
months after the law came into force.
29:41
So then that means that the six months,
29:42
maybe there could have been a drafting issue.
29:45
Maybe it started counting from 1st of July,
29:47
so that we're going up to 31st of December.
29:49
SPEAKER_01: But having said that from an advanced pricing agreement,
29:52
I think it's a welcome one because then it does give the
29:55
government the time to
29:57
SPEAKER_01: ensure that they look at those regulations,
29:58
SPEAKER_01: they subject them to public participation.
30:00
SPEAKER_01: And when they come into force, then everyone accepts them.
30:04
SPEAKER_01: The only question, Julian, is whether we should have pegged
30:08
the effective date of these particular registrations to the
30:12
time the regulations
30:13
SPEAKER_01: come into force.
30:14
SPEAKER_01: Because it is absurd that you implement a law,
30:17
SPEAKER_01: it is enforced already,
30:18
SPEAKER_01: but the regulations will be published in six months' time.
30:21
SPEAKER_01: So what happens in the intervening period?
30:23
SPEAKER_01: Does it mean then...
30:24
SPEAKER_01: that you can fail to comply and move scot-free.
30:26
SPEAKER_01: So there are those questions that someone might ask.
30:29
But I think it would be good practice to peg the effective date
30:32
of these laws that
30:33
SPEAKER_01: require regulations to the date that the regulations are also published.
30:37
SPEAKER_01: But the other thing that you also notice,
30:39
SPEAKER_01: Julian,
30:39
SPEAKER_01: is that,
30:40
SPEAKER_01: for example,
30:41
SPEAKER_01: for SEPT or Significant Economic Process Tax,
30:43
SPEAKER_01: the language that is used under Section 12e is that of mail,
30:47
SPEAKER_01: the commissioner or the cabinet secretary may publish.
30:50
which then means that there could be a case for the government
30:53
to argue that even
30:54
SPEAKER_01: if the regulations were not in place,
30:56
SPEAKER_01: we expected you to actually comply with SEPT,
30:59
SPEAKER_01: which obviously then would bring in some sort of disputes.
31:02
But as I said,
31:03
I think it's good practice we review these effective deeds,
31:05
Julian's.
31:06
SPEAKER_03: You raise a very good point there,
31:08
SPEAKER_03: Fred,
31:08
because one of my submissions in the previous public
31:10
participation exercise to the
31:11
Finance and Planning Committee was that the effective dates of
31:14
any provision should
31:15
be pegged on the visibility of the regulations guiding the
31:19
implementation.
31:21
SPEAKER_03: If you remember the experience you had with E-TEAMS,
31:23
It was absolutely chaotic because there were no regulations and
31:26
here we are still
31:27
SPEAKER_03: being expected to comply.
31:28
SPEAKER_03: But it hasn't been all hunky-dory on the Tax Procedures Act.
31:31
SPEAKER_03: Jilna,
31:31
speak to us about the increase in the number of days for KRA to
31:34
ascertain a tax
31:35
SPEAKER_03: refund from 90 to 128.
31:36
SPEAKER_03: Jilna Shah.
31:39
SPEAKER_02: So for refund applications,
31:41
SPEAKER_02: the CARE where they have,
31:42
SPEAKER_02: say,
31:42
SPEAKER_02: for example,
31:43
SPEAKER_02: an audit ongoing,
31:46
SPEAKER_02: then the refund processing window has moved from 120 days to 180 days.
31:51
SPEAKER_02: And where there is no audit,
31:54
SPEAKER_02: say they opted not to audit,
31:56
then the refund permissionless decision has moved from within
31:59
90 days to 120 days.
32:01
SPEAKER_02: So it's actually cushioning.
32:03
commissioner the time to ascertain their refunds basically
32:07
that's so obviously it's
32:08
a hit on the taxpayer because the cash flow gets affected by
32:12
the additional for
32:13
example 60 days where you're under an audit or another 30 days
32:17
if you're not under
32:19
an audit so it's just increasing the cash flow burden that we
32:23
already have in the
32:24
SPEAKER_02: system
32:25
SPEAKER_03: Yes, we are likely to see some hits there on cash flows.
32:27
SPEAKER_03: We hope it won't be too bad.
32:29
An open question now as we close our conversation on the tax
32:31
procedures is on section 77.
32:34
And I think the question of computing the time for filing an
32:37
objection and whether
32:38
SPEAKER_03: we are including weekends and public holidays or not.
32:41
SPEAKER_03: This was a matter of intense debate.
32:43
SPEAKER_03: Agnes, Fred, let me start with you.
32:45
SPEAKER_03: What are your thoughts on what you have finally seen in the act?
32:48
SPEAKER_03: And why is it important, by the way?
32:50
SPEAKER_02: So the provision that allowed that weekends and holidays,
32:53
SPEAKER_02: even public holidays,
32:54
SPEAKER_02: be part of the counting of days when we talk.
32:57
SPEAKER_02: And in this,
32:57
SPEAKER_02: the most recent one that Jilna has talked about,
33:00
SPEAKER_02: the 120 days that the carry has been granted to review applications.
33:05
I'd say,
33:05
what about the holidays that came in between that were not
33:08
expected?
33:09
SPEAKER_02: I remember either this year or last year,
33:11
SPEAKER_02: we had a tree planting day that was not initially in the calendar.
33:13
SPEAKER_02: And also...
33:15
There are a number of clients that one field deadline in terms
33:18
of applying or
33:19
SPEAKER_02: submitting the objections.
33:21
SPEAKER_02: And even from the KRA side,
33:22
the KRA giving status of their review or the KRA giving their
33:26
opinion on the
33:27
SPEAKER_02: objection that a taxpayer has lodged.
33:30
So excluding or having these extended,
33:33
for example,
33:33
in this case for KRAs,
33:36
SPEAKER_02: chance to 120 days from the 90 days,
33:38
I think it's better to have it this way as opposed to have a
33:42
shorter period,
33:43
SPEAKER_02: 90 days like in the previous case,
33:45
SPEAKER_02: and exclude the weekends.
33:46
And mostly because of the ambiguity that comes with any changes
33:50
that may appear
33:51
SPEAKER_02: that were not expected as holidays,
33:54
SPEAKER_02: especially holidays,
33:54
SPEAKER_02: because weekends are constant.
33:56
SPEAKER_02: In my opinion,
33:57
it's better than we have an extended period that covers both
34:01
weekends and weekdays
34:02
SPEAKER_02: so that
34:03
We are talking of calendar days as opposed to working days
34:07
because the working days
34:08
was bringing a lot of confusion both to the taxpayer side and
34:12
to the care side.
34:13
And in instances where we were dealing with high assessment and
34:17
the law provides
34:18
that you will be deemed to have accepted an assessment if you
34:21
do not lodge an
34:21
SPEAKER_02: objection within the set limit or the set number of days.
34:25
SPEAKER_02: For some taxpayers, it was detrimental.
34:27
So excluding the weekends is a better provision for both care
34:32
and for taxpayers.
34:34
SPEAKER_03: Certainly eases the administration burden there.
34:36
SPEAKER_03: Thank you so much.
34:36
SPEAKER_03: Fred, did you want to come in to that point?
34:39
SPEAKER_01: Yes, I could do that.
34:40
SPEAKER_01: And I agree with Agnes.
34:42
SPEAKER_01: You will recall that,
34:43
SPEAKER_01: and especially this one of excluding weekend that Pam recorded,
34:46
SPEAKER_01: it mostly applies to objections and appeals.
34:49
SPEAKER_01: So before 27th of December of 2024, we used to count the number of days.
34:53
SPEAKER_01: For example, for objection, there used to be 30 days.
34:55
SPEAKER_01: We used to count the current days.
34:57
So it used to disadvantage taxpayers,
34:58
especially when you have very long public holidays.
35:01
SPEAKER_01: I remember before this, you could be breaking for Christmas or 24th.
35:05
SPEAKER_01: And that is when actually most of the assessments used to come.
35:07
SPEAKER_01: So by the time you're having your Christmas holiday,
35:09
you're already worried about the number of days that are
35:12
already moving with a bit
35:13
SPEAKER_01: of speed.
35:14
SPEAKER_01: So then to that extent,
35:15
there's a leap to taxpayers because then you can be comfortable
35:18
that you can enjoy
35:19
SPEAKER_01: your holiday and come back and deal with your objection or the appeals,
35:22
SPEAKER_01: which is a good thing.
35:23
SPEAKER_01: And of course, Julian's also case have become a bit more complicated.
35:27
SPEAKER_01: So it requires a bit of more time to just put things together.
35:30
And the other thing that you must actually notice even from the
35:32
judgments of the
35:33
SPEAKER_01: TAT,
35:34
increasingly we are seeing a lot of taxpayers losing their
35:36
cases because of what we
35:38
SPEAKER_01: call supporting documentation.
35:40
Excluding weekends and public holidays then will allow the
35:42
taxpayers to put
35:43
together the documentation that is required to support the
35:46
appeal or the objection.
35:47
SPEAKER_01: But having said that,
35:48
SPEAKER_01: Julian,
35:48
I think it's also important that we look at this more and more
35:52
critically.
35:53
It's probably fashionable to defend that weekends and public
35:56
holidays should be excluded.
35:57
SPEAKER_01: But I think it is also good to ask ourselves
36:00
whether there are some other negative impacts that this one may
36:03
come with.
36:03
SPEAKER_01: And one of them that I see,
36:05
we have just come from Jilina telling us the implication of
36:09
increasing the number
36:10
SPEAKER_01: of days from 90 to 120,
36:12
SPEAKER_01: from 120 to 180 for refunds,
36:15
SPEAKER_01: which I think,
36:15
SPEAKER_01: if I hear us correctly,
36:17
what you're basically saying is that it may have a negative
36:19
impact on taxpayers
36:20
SPEAKER_01: because it may constrain the cash flows.
36:23
Now,
36:24
the question we need to ask ourselves is why are we
36:27
increasingly looking at these days?
36:28
SPEAKER_01: Because from a taxman perspective,
36:31
SPEAKER_01: the taxman will then say,
36:32
SPEAKER_01: I want to increase the numbers from 90 to 120 days.
36:35
SPEAKER_01: In any event,
36:36
you also have been given more days as far as the objection is
36:39
concerned from 30
36:41
SPEAKER_01: days and you have excluded weekends and time recall days.
36:44
SPEAKER_01: So as a result...
36:45
SPEAKER_01: We are likely then to see timelines just being reviewed negatively to the
36:49
SPEAKER_01: taxpayers,
36:49
SPEAKER_01: negatively to the 11-year authority as well.
36:51
So in my view,
36:52
where the timelines are working,
36:54
I don't think we should touch them.
36:55
SPEAKER_01: The other thing that you'll actually notice,
36:57
SPEAKER_01: Jurians,
36:57
SPEAKER_01: and if you look at history,
36:58
SPEAKER_01: you'll notice that some public colleges just come up.
37:01
SPEAKER_01: You know, there's a tree planting there.
37:03
So the question then is whether we'll have someone who is
37:06
behind configuration of
37:07
SPEAKER_01: ITACs updating this.
37:10
So then you don't add up with penalties and interest that are
37:13
loners just because
37:14
someone did not update a public holiday that was declared
37:17
because the practitioners
37:18
in the call will tell you getting penalties and interest
37:21
removed from the system
37:23
SPEAKER_01: when they have already been imposed.
37:25
It's actually probably harder than the sacrifice you would pay
37:29
for just spending an
37:30
SPEAKER_01: extra day to prepare that objection or prepare that particular appeal.
37:33
So I think the question on time,
37:35
we have to think about it more comprehensively.
37:38
SPEAKER_01: And in my view,
37:38
SPEAKER_01: when days are working,
37:39
I think creators retain them the way they are without
37:42
necessarily looking at them
37:42
SPEAKER_01: again.
37:43
Fred,
37:44
we can have this debate,
37:45
and we've had it in the past until we finish.
37:47
SPEAKER_03: Let's close it at that.
37:48
SPEAKER_03: Let me take two questions which I'm seeing online.
37:50
SPEAKER_03: The first one comes from Robert Ferreiro.
37:52
SPEAKER_03: This issue of the 2.5% withholding tax on freight income.
37:56
How will KRA assess and collect the 2.5% withholding tax on
37:59
freight income?
38:00
SPEAKER_03: And there's another question here being asked on the Tax Procedures Act.
38:03
SPEAKER_03: Shouldn't we have seen the amnesty being extended?
38:06
SPEAKER_03: That's a funny one.
38:07
SPEAKER_03: Maybe we can start with that one.
38:08
SPEAKER_03: Jill, should we have seen the tax amnesty being extended?
38:11
SPEAKER_02: I think we need to see how much has been collected to justify a case,
38:15
SPEAKER_02: hopefully in the next bill.
38:17
SPEAKER_02: But as it stands,
38:18
SPEAKER_02: I saw that there was a lot of last-minute rush,
38:20
SPEAKER_02: even from the KRA,
38:21
to close all assessments so that taxpayers could take advantage
38:26
of the amnesty.
38:27
SPEAKER_02: But at the moment,
38:29
SPEAKER_02: the sentiments or should we say the comments that we received was,
38:32
SPEAKER_02: why should we continue?
38:33
SPEAKER_02: Because we will never otherwise close at any point.
38:37
SPEAKER_02: We will always end up giving amnesties.
38:40
SPEAKER_02: So I think in that sense, we also need to comply as taxpayers.
38:44
So just to ensure we don't always get cushioned by the fact
38:47
that there's always an amnesty.
38:49
SPEAKER_02: I did also pray and we also pushed for it, but it didn't come true.
38:54
Maybe actually the question I had in mind around that was that
38:56
now that we had ITAX
38:57
SPEAKER_03: collapsing on the last day,
38:59
SPEAKER_03: we're having the amnesty being extended equally to July 5th.
39:02
SPEAKER_03: If you look at ITAX, it looks like a different story.
39:04
SPEAKER_03: But anyway,
39:05
SPEAKER_03: Agnes and Frederick,
39:06
who can help me on this issue of the 2.5 withholding tax on
39:08
freight income?
39:09
SPEAKER_01: I'm happy to do this.
39:11
SPEAKER_03: Go ahead, Frederick.
39:12
So if you look at freight tax currently or rather before the
39:15
Finance Act of 2025,
39:17
SPEAKER_01: it was being administered by way of self-assessment.
39:21
So more specifically,
39:22
it was imposed under Section 9.1 of the Income Tax Act.
39:25
SPEAKER_01: So what used to happen is that the agents of the shipping lines
39:30
SPEAKER_01: were the ones that were collecting the data,
39:31
SPEAKER_01: computing the freight tax,
39:33
SPEAKER_01: and limiting it to the government by the 20th day of the following month,
39:36
SPEAKER_01: which was a very straightforward way of looking at it.
39:39
If you look at the number of agents we actually have for the
39:41
shipping lanes,
39:42
SPEAKER_01: I think they allowed 47 when I last checked.
39:45
SPEAKER_01: So then it was easy for them to do that,
39:47
SPEAKER_01: and I think that is where Lombard is coming from,
39:48
SPEAKER_01: because then we are saying,
39:50
What the Finance Act basically has done is to remove this
39:53
obligation from the
39:54
SPEAKER_01: agent,
39:55
SPEAKER_01: has taken it to a withholding tax mechanism,
39:58
SPEAKER_01: where we are now seeing that the person paying the shipping line,
40:01
SPEAKER_01: which is an resident entity,
40:03
SPEAKER_01: the freight tax,
40:04
is the one who is supposed to then compute the freight tax and
40:07
limit it by way of
40:08
SPEAKER_01: withholding tax every five working days.
40:10
SPEAKER_01: And if you look at this,
40:11
the number of people that were expected to limit these
40:13
particular taxes are
40:14
SPEAKER_01: unimaginable.
40:15
SPEAKER_01: I would imagine they are in thousands.
40:18
SPEAKER_01: So the question then,
40:19
SPEAKER_01: would be,
40:20
is it easier to administer it when it was being done by the
40:23
agents by way of
40:24
SPEAKER_01: self-assessment?
40:25
Or it will be easier now that it will be done by a thousand and
40:29
one payers to the
40:30
SPEAKER_01: shipping lines?
40:31
SPEAKER_01: And Julian, we did engage the finance committee on this particular one.
40:34
SPEAKER_01: And where we're coming from is that we thought that moving this from a
40:38
self-assessment regime to a withholding tax regime would
40:41
actually most likely lead
40:43
SPEAKER_01: to leakage of tax.
40:45
SPEAKER_01: But then I don't think the proposal was actually taken.
40:47
SPEAKER_01: That's why we are having this conversation.
40:49
SPEAKER_01: But we hope to see maybe the impact as we go into the new year.
40:53
But having said that,
40:54
it's also good to mention where the government is coming from.
40:56
SPEAKER_01: If you look at Section 9.1,
40:58
you'll actually notice that there's some ambiguity as far as
41:01
this tax is concerned.
41:02
The loan does not put the obligation on the agent's query
41:06
because even when you
41:07
SPEAKER_01: look at Section 47 of the Income Tax Act,
41:09
there would have been an argument that the agent is actually
41:11
not obligated.
41:13
And the other thing actually you'll also notice is that this
41:15
particular piece of
41:16
SPEAKER_01: registration did not have a deadline.
41:18
So there was no,
41:19
like,
41:19
you're supposed to limit this freight trucks on a certain day.
41:22
SPEAKER_01: So I think based on those two major things,
41:24
the government thought it is good to introduce something that
41:27
at least will impose
41:29
SPEAKER_01: the obligation on a certain individual.
41:31
SPEAKER_01: And also,
41:31
SPEAKER_01: most importantly,
41:32
SPEAKER_01: put a denture into it,
41:33
in which case then they moved from a self-assessment to
41:36
withholding tax regime.
41:37
SPEAKER_01: But if you ask me,
41:38
maybe what should have been done is to put a bit of muscle to
41:41
the commissioner of
41:42
SPEAKER_01: domestic taxes,
41:43
SPEAKER_01: for them to be able to enforce the self-assessment regime,
41:46
SPEAKER_01: which I think was already working perfectly.
41:50
SPEAKER_03: Thanks, Fred.
41:50
I also struggled with it because it looked like the government
41:53
was very keen on
41:53
SPEAKER_03: getting some agencies to play the collection role.
41:56
SPEAKER_03: But again,
41:57
the cost of administration versus the yield that will be
41:59
realized is something we
42:00
SPEAKER_03: wait to see.
42:01
SPEAKER_03: Time is far spent.
42:02
We need to switch gears to income tax and possibly excise if
42:04
we'll have a minute.
42:06
SPEAKER_03: Agnes,
42:06
SPEAKER_03: help us understand advanced pricing agreements,
42:09
SPEAKER_03: one of my key highlights in Finance Act 25.
42:12
SPEAKER_02: Thank you, Julian.
42:13
SPEAKER_02: The advanced financing agreement will ideally simplify transfer pricing
42:18
SPEAKER_02: documentations with the KRE.
42:19
We've had a series whereby companies or entities have transfer
42:23
pricing documents or
42:24
SPEAKER_02: transfer pricing policies in place.
42:26
SPEAKER_02: And to give as an example, we'd have...
42:29
SPEAKER_02: maybe a margin,
42:30
SPEAKER_02: a profit margin,
42:31
SPEAKER_02: say,
42:31
SPEAKER_02: of 5%,
42:32
SPEAKER_02: and the company would be operating the same,
42:35
SPEAKER_02: say,
42:35
SPEAKER_02: for a number of years.
42:36
SPEAKER_02: And the KRA will then come,
42:38
SPEAKER_02: and after they do the assessment,
42:40
SPEAKER_02: they decide that they need to revise such a margin upward,
42:43
SPEAKER_02: say,
42:43
SPEAKER_02: to 7.5%.
42:45
SPEAKER_02: The question has always been from the taxpayer side,
42:48
SPEAKER_02: since they do have a transfer pricing document,
42:50
And I believe it followed the strict measure of the preparation
42:54
of a proper
42:55
SPEAKER_02: transfer present documents.
42:56
SPEAKER_02: But the KRA has a different view.
42:58
SPEAKER_02: And of course,
42:58
benchmarking analysis may differ from time to time based on the
43:03
data that has been
43:04
SPEAKER_02: used.
43:05
So you'd find out institutions whereby as much as a taxpayer
43:08
has not willingly
43:10
SPEAKER_02: avoided tax,
43:10
SPEAKER_02: they'd find themselves with...
43:12
SPEAKER_02: tax assessments or tax areas that the KRA may impose on them.
43:16
Advanced pricing agreements will come to solve that because it
43:20
means that even
43:20
SPEAKER_02: before I trade,
43:21
I'll be able to enter into an agreement with KRA and probably
43:24
agree on the 5%.
43:26
SPEAKER_02: And as I operate my businesses,
43:28
SPEAKER_02: I will know that from a transfer pricing perspective,
43:31
SPEAKER_02: I am covered.
43:32
SPEAKER_02: They are limited up to five years as per the provisions of the law,
43:36
which I think is a considerable period for business sales to
43:39
change or for the
43:40
SPEAKER_02: metrics in the industry to change,
43:43
which then means a revision or an update of the transfer
43:46
presence can be done and
43:47
SPEAKER_02: then a new or a revised agreement can then be entered into with KRA.
43:53
SPEAKER_03: Thank you, Agnes.
43:54
And I think also it's important to highlight that between
43:56
Finance Bill and what
43:58
SPEAKER_03: you're seeing in the Finance Act,
43:59
there was the adjustment that in the event that you're found to
44:02
have entered an
44:03
SPEAKER_03: advanced pricing agreement on fraudulent or incorrect information,
44:07
SPEAKER_03: then there will be consequences coming from the Revenue Authority.
44:11
SPEAKER_03: Jilna,
44:11
there was so much debate around Finance Bill and significant
44:14
economic presence tax
44:15
and whether we should have the 5 million annual turnover
44:18
threshold or not.
44:20
SPEAKER_03: What finally carried the day and where do you lie on this debate?
44:24
SPEAKER_02: First of all,
44:24
I wasn't even sure when significant economic presence tax was
44:28
introduced and this
44:29
SPEAKER_02: $5 million threshold was even introduced.
44:32
SPEAKER_02: It just did not make sense to me from,
44:34
SPEAKER_02: if I look at it,
44:35
SPEAKER_02: remember this SEP tax is applicable to non-residents.
44:39
And if you convert $5 million into USD,
44:42
it just was a very small amount for them.
44:44
SPEAKER_02: So they would anyways be caught in that bracket.
44:47
SPEAKER_02: So I just never understood the limit in the first instance.
44:51
SPEAKER_02: Anyways, we are where we are.
44:53
SPEAKER_02: This limit has now been removed, so it will be applicable.
44:57
I think they've aimed for this set tax to be applicable to all
45:00
non-residents that
45:02
SPEAKER_02: are in that space.
45:03
SPEAKER_02: They've even expanded the significant economic presence tax,
45:06
which was initially limited to the digital marketplace to now
45:09
any services that are
45:10
SPEAKER_02: supplied over the internet or electronic means.
45:13
We're yet to see the application because as I think Frederick
45:17
has already said,
45:18
SPEAKER_02: the regulations and the fact that there is a whole May around this,
45:21
SPEAKER_02: whether they will publish these regulations,
45:24
SPEAKER_02: we're yet to see.
45:25
So it's caused a bit of confusion even for non-residents when
45:29
they query this tax.
45:31
But we're yet to see any clarifications on this and how
45:34
successful it's also been.
45:36
SPEAKER_02: We are not sure at the moment as we speak.
45:39
SPEAKER_03: Thank you for that, Jilna.
45:40
SPEAKER_03: And coming over to Fred,
45:41
SPEAKER_03: one of the things which I raised in the debate around finance bill was,
45:45
should we be debating fundamentally about the rate of
45:48
significant economic presence
45:50
SPEAKER_03: tax as opposed to whether or not we should be having a threshold?
45:52
Because as Jilna said,
45:53
and I fully agree,
45:54
the 5 million just didn't make sense to begin with.
45:57
SPEAKER_03: Fred.
45:58
SPEAKER_01: As far as the threshold is concerned,
46:00
SPEAKER_01: in my view,
46:00
SPEAKER_01: I would think that maybe there is need to have a threshold.
46:03
SPEAKER_01: And the reason I say that is because sometimes,
46:05
SPEAKER_01: and I think as you just mentioned that in our previous discussion,
46:09
SPEAKER_01: that sometimes you've got to look at the costs of compliance,
46:12
SPEAKER_01: as far as what the tax that whatever is yielding.
46:15
The fundamental problem that I think came in with that
46:18
particular proposal is that
46:20
SPEAKER_01: the 5 million threshold was not qualified,
46:24
SPEAKER_01: whether it was jurisdiction-based or it was worldwide revenue.
46:27
SPEAKER_01: So if it is going to be worldwide level new,
46:29
SPEAKER_01: which is what most of us did interpret it to be,
46:32
SPEAKER_01: because in the absence of that credit,
46:34
SPEAKER_01: then it was already safer to interpret it that way.
46:36
Then it means that threshold that was under Section 12 was as
46:40
good as nonexistent.
46:42
SPEAKER_01: And I think that is where GILNA is coming from.
46:44
But what about saying that we specify in the law that there's a
46:49
threshold of 5
46:50
SPEAKER_01: million,
46:50
SPEAKER_01: but that 5 million is billed
46:52
SPEAKER_01: on the 11 news that the non-resident company makes in Kenya.
46:57
SPEAKER_01: Because you can imagine if you're making less than 5 million,
47:00
SPEAKER_01: sometimes the cost of hiring a consultant because you're not here,
47:03
SPEAKER_01: you know,
47:04
SPEAKER_01: that headache of trying to transform money,
47:05
sometimes it may just outweigh the benefit of even the
47:08
government receiving that
47:09
SPEAKER_01: amount.
47:09
SPEAKER_01: And we have actually seen taxpayers who are in that category.
47:12
SPEAKER_01: So for me,
47:12
SPEAKER_01: I think they should have clarified,
47:14
SPEAKER_01: and we did submit on that,
47:15
SPEAKER_01: them to clarify whether it's a junior base.
47:17
SPEAKER_01: And actually, if you look at the best practice, Julian's,
47:20
Look at countries like India and even Nigeria who have
47:23
implemented this CEP,
47:24
SPEAKER_01: you actually notice that they have thresholds,
47:26
SPEAKER_01: only that in their respective jurisdictions,
47:28
SPEAKER_01: they have been able to specify and make it very clear.
47:31
SPEAKER_01: And also the 5 billion,
47:32
SPEAKER_01: whatever number,
47:33
is also well benchmarked to ensure that you are achieving the
47:36
objective that you
47:37
need to achieve and not just throwing out a number there that
47:40
you may end up not
47:41
SPEAKER_01: achieving the objective that you're going to achieve.
47:43
SPEAKER_01: But having said that, I think CEPT is an area that is growing.
47:46
SPEAKER_01: We are likely to see many changes.
47:47
Maybe there's the next exempt and related things that we will
47:51
be seeing each and every year.
47:52
SPEAKER_01: I don't know.
47:53
As you can clearly see,
47:54
we are still not agreeing on this matter,
47:56
even on this discussion.
47:57
SPEAKER_03: Agnes, where do you lie on this debate of tax and the threshold?
48:02
SPEAKER_02: I concur with what Fred and Jilna have raised.
48:05
SPEAKER_02: And especially when you talk of the threshold,
48:07
SPEAKER_02: are we referring to what you earn in Kenya,
48:10
SPEAKER_02: which would make a bit of sense?
48:12
Or are we referring to the income that the company earns from a
48:16
global perspective?
48:17
SPEAKER_02: So my second question would be,
48:19
this is coming after the repeal of DST and the formula of CET
48:24
being the 30%
48:25
SPEAKER_02: Chinese.
48:27
SPEAKER_02: that the result and rate being 3%.
48:30
SPEAKER_02: So the question we ask ourselves is,
48:32
SPEAKER_02: before we even came with this amendment of the Finance Act of 2025,
48:37
SPEAKER_02: SLEPT had been introduced through the Tax Laws Amendment Act.
48:40
SPEAKER_02: During the six-month period,
48:42
SPEAKER_02: how much has the revenue authority collected from this specific tax?
48:45
So that now we are able to weigh,
48:47
as Fred was pointing out,
48:49
the cost-benefit of it.
48:51
SPEAKER_02: Because these are non-resident,
48:52
SPEAKER_02: they are out there,
48:53
SPEAKER_02: there's the transactional changes,
48:55
SPEAKER_02: the exchange rate expenses,
48:57
them needing to hire someone who understands taxes in Kenya and
49:00
all that.
49:01
SPEAKER_02: What are the cost benefits of it?
49:03
I feel like as much as it's a good tax because it broadens the
49:06
tax bracket,
49:07
SPEAKER_02: there should be clearer regulations.
49:10
SPEAKER_02: And I think we wait to see.
49:11
SPEAKER_02: As you were mentioning, we already late.
49:13
SPEAKER_02: The law started in December.
49:15
SPEAKER_02: Six months are needed to have regulations.
49:17
So I think we wait to see that the regulations will provide
49:21
more clarity and more
49:22
SPEAKER_02: considerations.
49:23
SPEAKER_02: And especially in this space where non-residents are not in Kenya yet,
49:27
SPEAKER_02: they are required to submit attacks that is in Kenya.
49:31
SPEAKER_03: Thank you very much,
49:32
SPEAKER_03: Agnes,
49:32
and we would like to close significant economic presence tax at
49:35
that point.
49:36
SPEAKER_03: Let me come back to Fred.
49:37
SPEAKER_03: One of the things which almost surprised,
49:39
SPEAKER_03: I think,
49:40
SPEAKER_03: a good number of us is that when we saw on the floor of the House,
49:42
SPEAKER_03: Section 12F of the Income Tax Act being repealed,
49:45
SPEAKER_03: and we have effectively done away with the digital assets tax,
49:49
SPEAKER_03: something which came about very recently via Finance Act 23.
49:53
Fred,
49:53
where is the government coming from with this,
49:55
and did you see this move coming?
49:57
SPEAKER_01: I was actually surprised to see the debut of digital asset tax,
50:00
SPEAKER_01: considering what we have just mentioned.
50:02
SPEAKER_01: I think it came into effect on 1st of September of 2023.
50:04
So it means that we have not even hit 24 months since these tax
50:09
were introduced.
50:10
What was in the finance bill was actually a reduction of the
50:13
rate from 3% to 1.5%,
50:17
SPEAKER_01: which was then speaking to maybe the outcry that has been out there.
50:20
SPEAKER_01: But having said that,
50:21
SPEAKER_01: Julian,
50:22
I think there was a fundamental challenge or problem with the
50:25
way this particular
50:26
SPEAKER_01: rule was drafted.
50:27
If you recall,
50:28
the 3% digital asset tax was actually based on the transaction
50:32
value.
50:32
What it actually meant is that the owner of a platform where
50:35
you are exchanging
50:36
some of these virtual assets would be required to limit 3% on
50:41
the amount that has
50:42
SPEAKER_01: been transacted.
50:43
SPEAKER_01: which basically means if you are to use an example of a bank transfer,
50:47
SPEAKER_01: if you are transferring a million,
50:49
SPEAKER_01: then that 3% is based on the million that you are transferring.
50:52
You can see a problem right there because the million does not
50:55
necessarily mean
50:55
SPEAKER_01: that it is income that you have delivered or accrued from Kenya.
50:58
SPEAKER_01: It definitely may mean that whatever is being transferred,
51:01
you have actually made a loss in a certain transaction in
51:04
trading of some of these
51:05
SPEAKER_01: virtual assets like cryptocurrency.
51:06
So there was a problem right there in terms of the way the same
51:10
was drafted from the one go.
51:11
SPEAKER_01: And I think when we were doing these submissions,
51:13
we saw quite a number of players in this particular sector
51:16
trying to plead the
51:17
SPEAKER_01: government,
51:17
SPEAKER_01: look,
51:18
SPEAKER_01: we are actually probably even taxing capital.
51:20
And I think that is when there was the thinking that they
51:23
should review the base.
51:24
If we look at how this digital asset tax is actually done in
51:27
other countries or how
51:28
virtual assets are passed in other countries such as France and
51:31
even the UK,
51:33
mostly it is either business income in terms of how much has
51:36
someone made from a
51:37
SPEAKER_01: certain transaction.
51:38
SPEAKER_01: Say you have traded a cryptocurrency.
51:40
SPEAKER_01: How much have you made from that particular transaction?
51:42
SPEAKER_01: So you pay either capital gains tax on the gain that you have made.
51:45
SPEAKER_01: Or you actually pay business income.
51:47
SPEAKER_01: If you're an individual,
51:48
SPEAKER_01: you're subject to the gain that you have to the pay brackets,
51:51
SPEAKER_01: and then you pay the tax,
51:52
SPEAKER_01: which is what the best practice dictates.
51:54
But I believe the review from 3% to 1.5% was in recognition
51:58
that maybe the
51:59
government is still doing a bit of research to know how this
52:02
sector should be
52:03
SPEAKER_01: taxed.
52:03
And I understand there is actually a task force that has been
52:05
set within the
52:06
Lebanon Authority for them to do a bit of research and see what
52:09
is the optimal way
52:10
SPEAKER_01: of taxing this particular sector.
52:12
But I think the key thing also to mention is that though
52:14
digital asset tax has been
52:16
SPEAKER_01: dropped,
52:16
I think you have seen the introduction of excess duty on the
52:19
fees that is charged
52:20
SPEAKER_01: by these owners of platform.
52:22
SPEAKER_01: That is the virtual asset service providers,
52:24
which is I think at the rate of 10% on the fee that they do
52:27
charge their customers.
52:28
SPEAKER_01: So I think there will still be some sort of revenue there.
52:31
But I expect a lot of noise as far as taxation of virtual
52:34
assets is concerned in
52:35
the next few years as the government tries to put their finger
52:39
on how this sector
52:40
SPEAKER_01: should be taxed.
52:41
SPEAKER_03: As a matter of fact,
52:42
SPEAKER_03: we have the virtual asset service provider still,
52:45
which has just gone through Parliament and is still actually in
52:48
the House going
52:48
SPEAKER_03: through the vigours of the legislative processes.
52:50
SPEAKER_03: We shall keep an eye on that to see how that pans out.
52:53
Taking forward our conversation on income tax changes,
52:56
let me come to Jill now.
52:58
And we have seen changes on investment allowances for
53:00
investments of a billion
53:02
shillings plus and for hotel buildings and buildings for
53:04
manufacturing that had
53:06
SPEAKER_03: been proposed for deletion,
53:07
SPEAKER_03: now being retained as per the Finance Act.
53:10
SPEAKER_03: How crucial is this, Jilla?
53:12
SPEAKER_02: I think the fact that we are looking at deletion of the 100% allowance on
53:17
SPEAKER_02: investments that are very capital or intensive,
53:20
SPEAKER_02: such as your buildings for manufacturing or hotel buildings,
53:25
SPEAKER_02: they're looking at millions.
53:26
SPEAKER_02: There was also investment in an SEZ that was also proposed to be deleted.
53:31
So that means there will no longer be any allowance on that and
53:35
it will revert back
53:36
SPEAKER_02: to the normal rates of investment allowances.
53:40
SPEAKER_02: So because it was specific to manufacturing sector,
53:43
SPEAKER_02: all these would have been heavily affected,
53:45
SPEAKER_02: obviously.
53:45
The fact that they've actually been retained gives comfort that
53:48
you can now claim
53:49
SPEAKER_02: the 100% allowance.
53:51
SPEAKER_02: However,
53:52
SPEAKER_02: on the flip side,
53:53
SPEAKER_02: remember,
53:53
you can claim 100% in that first year of use once you make that
53:58
investment.
53:58
SPEAKER_02: But remember, if you invest billions...
54:01
Your claim is in billions in terms of the capital allowances or
54:05
investment
54:06
SPEAKER_02: allowances,
54:06
SPEAKER_02: as we call them.
54:07
SPEAKER_02: Remember, your tax losses have now been obviously curbed at five years.
54:11
So the maximum that you can carry forward is anyways limited to
54:15
five years
54:16
SPEAKER_02: If it's huge and you're not able to recover the 100% claim,
54:20
SPEAKER_02: say it takes around 12 years or 10 years to recover that over time,
54:24
then from year five only you'll not be able to recover since
54:28
your loss would be
54:29
SPEAKER_02: capped unless you make a specific application to the cabinet secretary.
54:34
for another extension of five years,
54:36
but that would be now on a case-by-case basis.
54:39
SPEAKER_02: So there's no guarantee.
54:40
SPEAKER_02: So how comfortable would an investor,
54:42
SPEAKER_02: a foreign investor be,
54:44
SPEAKER_02: who was investing billions,
54:46
SPEAKER_02: say,
54:46
SPEAKER_02: in an industry,
54:48
SPEAKER_02: and then you're telling him that,
54:49
SPEAKER_02: okay,
54:49
SPEAKER_02: the maximum that this can be carried forward,
54:51
SPEAKER_02: because by the time you recover,
54:53
SPEAKER_02: is only up to five years,
54:54
SPEAKER_02: because then we have the tax loss issue also coming in.
54:58
SPEAKER_03: Julian,
54:58
SPEAKER_03: now that you've touched the issue of the carry forward of tax losses,
55:02
SPEAKER_03: perhaps at five years,
55:03
we have been here before and I've struggled with where the
55:06
government is coming
55:07
SPEAKER_03: from with this adjustment,
55:08
SPEAKER_03: because this was the case earlier from 2009,
55:11
SPEAKER_03: I think,
55:11
SPEAKER_03: and then we had to adjust it and the point where we were in 2020,
55:14
SPEAKER_03: where it was now carried forward almost in infinity.
55:17
And here we are again,
55:18
where exactly is the government coming from with this?
55:21
I think I'm also baffled because I would also like to see how
55:24
many companies are
55:25
SPEAKER_02: actually in a loss that goes on beyond,
55:28
SPEAKER_02: I would say,
55:28
SPEAKER_02: 10 years,
55:29
SPEAKER_02: to be honest,
55:30
because it's very rare to find someone who's always in a tax
55:34
loss position.
55:35
It's a very handful,
55:37
maybe,
55:37
of industry taxpayers that would come in that bracket.
55:40
SPEAKER_02: But a majority of them,
55:42
if you look at the capital-intensive industries that we are now
55:45
trying to say,
55:46
SPEAKER_02: let's bring in foreign investors,
55:48
SPEAKER_02: let's put in investments in the economy,
55:50
SPEAKER_02: We're looking at a lot of money that you're expecting people to put in,
55:54
SPEAKER_02: and you're saying to them,
55:55
SPEAKER_02: the car being this loss.
55:57
SPEAKER_02: So what are we really attracting?
55:59
SPEAKER_02: I don't know.
56:00
SPEAKER_02: But the basis that many people are not paying taxes,
56:03
SPEAKER_02: but you see the taxes are still being paid in terms of PAYE,
56:07
SPEAKER_02: VAT,
56:08
SPEAKER_02: import duties,
56:09
SPEAKER_02: you name it.
56:09
SPEAKER_02: There's still another portion of tax that is still being collected,
56:13
SPEAKER_02: if not CIT,
56:14
SPEAKER_02: for example,
56:15
SPEAKER_02: from that industry,
56:16
SPEAKER_02: for example,
56:16
SPEAKER_02: who's saying that tax loss position.
56:19
But I'm yet to see any data as to how many taxpayers in reality
56:23
are we really talking about.
56:25
SPEAKER_03: Frederick Agnes, any thoughts on this carry forward of tax losses?
56:28
Yes,
56:29
Julian,
56:29
I'd be happy to give my comments and especially on the tax
56:32
losses.
56:33
SPEAKER_02: As you've mentioned, this is one of the laws that has been changing.
56:36
SPEAKER_02: I think it started with losses.
56:38
SPEAKER_02: Infinity went to four years, went to 10 years.
56:41
SPEAKER_02: Infinity, now we are back to five years.
56:43
SPEAKER_02: So my question is,
56:44
I'm an investor who made a decision to invest billions of
56:48
shillings based on the
56:49
SPEAKER_02: fact that I can claim my tax losses to infinity.
56:52
SPEAKER_02: Then a few years down the line, the same changes to five years.
56:56
SPEAKER_02: Where does that leave me?
56:57
And just as Jill now was talking of the window to apply through
57:01
the CS for an
57:02
SPEAKER_02: extension,
57:02
it's a good move as opposed to what was in the bill that only
57:06
provided for losses
57:08
SPEAKER_02: up to five years and that was it.
57:09
SPEAKER_02: But then again, it's not a guarantee, as she mentioned.
57:12
SPEAKER_02: So when I'm making strategic decisions as an investor,
57:15
I don't want to base my decisions on something that is 50-50 or
57:20
something that I'm
57:20
SPEAKER_02: not sure about.
57:21
SPEAKER_02: And again, to speak of
57:23
SPEAKER_02: Companies that have huge tax losses,
57:25
there are companies that have probably been given the
57:28
investment deductions at
57:29
SPEAKER_02: 100%,
57:30
SPEAKER_02: at 50%.
57:31
SPEAKER_02: So are we giving with one hand and taking with the other?
57:34
So why give me 100% investment deduction just for you to come
57:38
and take with the
57:39
SPEAKER_02: losses five years later?
57:40
SPEAKER_02: And just to mention,
57:41
these huge companies that actually have the huge losses because
57:45
they invested huge
57:46
SPEAKER_02: capital bring more than taxes to the table.
57:48
SPEAKER_02: They are the ones that will provide employment.
57:50
They are the ones that will enable the economic status of a
57:53
certain area to grow significantly.
57:56
So can we look beyond the taxes that we are collecting and
57:59
focus more even on the
58:00
economic growth of the country and the benefits that come with
58:04
huge investors or
58:05
SPEAKER_02: high capital intensive investors?
58:07
SPEAKER_01: Do you want to think about this?
58:08
SPEAKER_01: Yeah, sure, sure, Julian.
58:09
SPEAKER_01: And I agree with Jill and Agnes 100%.
58:13
SPEAKER_01: When I saw this provision,
58:14
SPEAKER_01: it's one of those cases where you actually,
58:16
SPEAKER_01: it's almost tantamount to trying to kill a mosquito using a hammer.
58:20
SPEAKER_01: Maybe just use that phrase.
58:22
SPEAKER_01: Because when you look at the spirit behind it,
58:24
the way it has been advanced by the policymakers is that there
58:28
are companies that
58:29
SPEAKER_01: are reporting losses.
58:30
year in,
58:31
year out,
58:31
and in their thinking is that the books are actually not
58:35
correct.
58:35
SPEAKER_01: You can imagine most of the companies that have this level of investment,
58:39
SPEAKER_01: even the level of audit that they actually go through,
58:41
SPEAKER_01: live around the career audits,
58:42
SPEAKER_01: but even the financial audits.
58:43
SPEAKER_01: So I don't believe that is the case.
58:45
There could be one or two companies,
58:47
but would the one or two companies actually justify
58:51
allowing tax losses for companies that have incurred that
58:55
particular expenditure.
58:56
SPEAKER_01: For me,
58:56
I do believe that the government should be able to audit such
59:00
companies and they
59:01
have powers under the various tax statutes for them to then
59:04
assess any additional
59:05
tax that they believe should have been paid based on the books
59:08
that are not very
59:09
SPEAKER_01: accurate.
59:09
SPEAKER_01: But for me,
59:10
SPEAKER_01: Julian,
59:10
SPEAKER_01: I think the bigger problem,
59:11
SPEAKER_01: and I said correctly here,
59:13
SPEAKER_01: maybe we could look at it.
59:14
SPEAKER_01: When you look at that particular change,
59:16
SPEAKER_01: especially on the extension,
59:18
I see a bit of technicality in there because the Finance Act
59:22
2025 appears to amend
59:24
SPEAKER_01: a section that was already issued by the Finance Act of 2022.
59:27
So I think there will be a bit of conversation there in terms
59:30
of is that extension
59:31
even there in the first place if the Act is actually amending
59:34
an unexistent section
59:36
SPEAKER_01: under the law.
59:36
SPEAKER_01: So there's a bit of conversation there.
59:38
SPEAKER_01: And I do.
59:39
And I think there are quite a number of provisions which then
59:41
begs the question in
59:42
SPEAKER_01: terms of our tax laws that we have on maybe Kenya law,
59:46
whether they are actually up to date or whether there are some
59:48
still provisions
59:49
SPEAKER_01: that are existing there and whether they actually need a bit of cleanup.
59:52
SPEAKER_01: But I think that is just for us to think around.
59:55
SPEAKER_01: I could be wrong in terms of whether that section actually do exist.
59:59
SPEAKER_01: But based on my peruse of the Act,
1:00:01
it appears like that section was already deleted by the Finance
1:00:03
Act of 2022.
1:00:04
SPEAKER_01: Jolians.
1:00:06
SPEAKER_03: Thank you Fred for that.
1:00:07
SPEAKER_03: We need to wrap up this conversation in 10 minutes.
1:00:08
SPEAKER_03: So I have one question to go.
1:00:10
What do you think to many of us by surprise were the changes to
1:00:13
betting and gaming
1:00:14
SPEAKER_03: with holding tax?
1:00:14
We have seen the change from winnings to withdrawals and the
1:00:17
rate coming down from 20 to 5%.
1:00:18
SPEAKER_03: What do you make of this?
1:00:21
SPEAKER_02: Yes, there was the provision that revises the rate to 5%.
1:00:25
And also there has been the new definition or rather the
1:00:28
repealing of the term
1:00:29
SPEAKER_02: winnings and introduction of the term withdrawals.
1:00:33
So the 5% will now be applicable on what the punta withdraws or
1:00:38
what the punta is
1:00:40
SPEAKER_02: after they have made their bets.
1:00:42
SPEAKER_02: So my thoughts on this are first,
1:00:43
SPEAKER_02: when we think of betting from a moral perspective,
1:00:46
SPEAKER_02: with the taxes that are in place,
1:00:48
SPEAKER_02: are we encouraging betting or are we discouraging betting?
1:00:51
SPEAKER_02: And especially when we look at the youth,
1:00:53
SPEAKER_02: and I would say there has been a lot of,
1:00:55
SPEAKER_02: I don't know whether it's the right to use the word addiction to betting,
1:00:58
SPEAKER_02: whereby there's too much betting of it that feels uncontrollable,
1:01:01
SPEAKER_02: which from a moral perspective is not a good thing.
1:01:04
SPEAKER_02: So when the tax rate moves to 5% from the initial 20%,
1:01:09
SPEAKER_02: my question is,
1:01:10
SPEAKER_02: what exactly guides that new provision?
1:01:13
SPEAKER_02: And just to also note that even under excess duty,
1:01:17
SPEAKER_02: there are also some adjustments on betting whereby the definition or
1:01:21
SPEAKER_02: the amount that is now applicable to excess duty is the deposit.
1:01:25
The amount that a beta or a punta deposits in their phone is
1:01:29
taxed outright.
1:01:30
SPEAKER_02: So it's like the rate has reduced from an income tax perspective,
1:01:33
SPEAKER_02: but then when we go to excess duty,
1:01:36
SPEAKER_02: the amount that is being applied tax on has been expanded.
1:01:39
SPEAKER_02: I think for me,
1:01:40
I still feel like betting is a tax or something that should
1:01:45
suffer from something
1:01:46
SPEAKER_02: we used to call
1:01:47
SPEAKER_02: SIM tax or a tax that is applied to discourage certain activities.
1:01:52
SPEAKER_02: I feel like moving it to 5% is not in line with the discouraging betting,
1:01:58
SPEAKER_02: but then again,
1:01:58
SPEAKER_02: when you put it from the side of excess duty,
1:02:00
SPEAKER_02: where a broader amount has been covered,
1:02:02
SPEAKER_02: I think there's a bit of balance on both laws in the finance act.
1:02:07
SPEAKER_01: Well, not much, Julian.
1:02:09
SPEAKER_01: I think I do agree with the comments by Agnes 100%.
1:02:13
The question is why we keep seeing these changes in this
1:02:15
particular sector.
1:02:17
And I think Agnes has mentioned quite a number of fundamental
1:02:19
things there,
1:02:20
SPEAKER_01: including the policy behind these stats.
1:02:22
The only thing that I may want to mention is that now we appear
1:02:25
to be moving from
1:02:27
SPEAKER_01: taxing the winnings,
1:02:28
SPEAKER_01: again,
1:02:29
SPEAKER_01: the concept of income,
1:02:30
SPEAKER_01: and actually taxing even the amount that someone has ticked.
1:02:34
SPEAKER_01: Remember,
1:02:34
SPEAKER_01: the current law,
1:02:35
SPEAKER_01: especially from a withholding tax perspective,
1:02:37
SPEAKER_01: is only imposing withholding tax on the gain that you make after betting.
1:02:41
Say you place a bet of 100 shillings,
1:02:43
you are paid 110,
1:02:45
the tax is only on the 10.
1:02:46
SPEAKER_01: And I would imagine that is why probably the rate was a bit high.
1:02:49
SPEAKER_01: But now the way the law appears to have been worded,
1:02:52
SPEAKER_01: it appears like the tax will be on the total withdrawal,
1:02:55
SPEAKER_01: which is 110.
1:02:55
SPEAKER_01: So if you impose a 5% on the 110, obviously it's a very high tax.
1:03:00
SPEAKER_01: But again,
1:03:01
this one seems to contradict some case laws that I've actually
1:03:04
seen where one of
1:03:05
the betting companies has actually successfully petitioned the
1:03:08
court and argued
1:03:10
SPEAKER_01: that it is not right to tax the amount of money that someone has taken.
1:03:13
So I think this is one of the provisions that you'll wait and
1:03:15
see how it will be
1:03:17
SPEAKER_01: implemented and whether maybe there could be some petitions on the firm.
1:03:22
SPEAKER_02: And maybe I can add a comment on the same that,
1:03:25
SPEAKER_02: I don't know,
1:03:25
maybe perhaps the whole point of doing that is I think the
1:03:29
intention was to collect
1:03:30
SPEAKER_02: a lot of taxes.
1:03:31
SPEAKER_02: In the previous regime,
1:03:32
they did not collect because a lot of these betting companies
1:03:35
moved offshore and
1:03:36
SPEAKER_02: obviously also the money moved offshore.
1:03:39
So I think just to try and see if this way they can try and
1:03:42
retain the money.
1:03:44
All the companies back to Kenya is probably something that
1:03:47
they're intending to do,
1:03:48
SPEAKER_02: although I'm not 100% sure if that has been the real intention.
1:03:52
SPEAKER_02: We are yet to see on that, Frederick.
1:03:53
That's just what I thought was the reason of maybe changing it
1:03:57
and relaxing the rate.
1:03:59
SPEAKER_02: Although,
1:04:00
SPEAKER_02: as you're right,
1:04:00
SPEAKER_02: as you say,
1:04:01
SPEAKER_02: if you really work it backwards,
1:04:02
SPEAKER_02: it ends up being a bit more higher as opposed to a lower rate.
1:04:06
And I agree with Jilna because when you look at the news in the
1:04:09
recent past,
1:04:10
I think there was a bit of a fright in terms of most of those
1:04:13
companies leaving
1:04:13
SPEAKER_01: Kenya and going up to set elsewhere.
1:04:16
Maybe that has also informed some of the changes that we have
1:04:18
actually seen.
1:04:19
SPEAKER_00: Mokaya here will go thrown out.
1:04:21
SPEAKER_00: Twitter sometimes acts up.
1:04:23
But he wants us to allow you to give your closing thoughts on
1:04:26
this and perhaps also
1:04:27
SPEAKER_00: cover some of the other things that may not have been covered so far.
1:04:31
SPEAKER_00: We'll start with Jilna and then Fred in that order.
1:04:34
SPEAKER_02: Thank you, Eric.
1:04:35
SPEAKER_02: I think for me,
1:04:36
SPEAKER_02: in terms of closing thoughts,
1:04:39
SPEAKER_02: this act has obviously,
1:04:41
SPEAKER_02: from the finance bill,
1:04:42
SPEAKER_02: I can see a lot has been listened to from the public,
1:04:46
SPEAKER_02: I'll say that.
1:04:47
SPEAKER_02: But a lot has also been brought in, which was previously not there.
1:04:52
SPEAKER_02: So I think in terms of impact,
1:04:55
SPEAKER_02: we are yet to see how it's going to impact the affected industries,
1:04:59
SPEAKER_02: especially.
1:05:00
SPEAKER_02: I've seen a lot of paper on excise duty sites.
1:05:03
SPEAKER_02: There's a lot of add-backs,
1:05:04
SPEAKER_02: introductions as well,
1:05:06
SPEAKER_02: ceramics,
1:05:06
SPEAKER_02: I would say,
1:05:07
SPEAKER_02: even from an export and promotion levy.
1:05:10
There have been a bit more introductions with even the rates
1:05:12
being still kept for
1:05:14
SPEAKER_02: at least the iron at 17.5.
1:05:15
SPEAKER_02: So we get to see the impact, obviously, on that industry.
1:05:20
SPEAKER_02: And I don't know what the intention eventually was for doing that.
1:05:24
SPEAKER_02: I think we wanted to see a proper cleanup done.
1:05:26
SPEAKER_02: That was the ask.
1:05:27
SPEAKER_02: If this was supposed to be a cleanup,
1:05:29
SPEAKER_02: we still find that a lot of the provisions still need a better cleanup,
1:05:34
SPEAKER_02: yet that has been left behind.
1:05:36
SPEAKER_02: So...
1:05:37
SPEAKER_02: I don't know if it's just been an interim cleanup,
1:05:39
SPEAKER_02: as I would call it,
1:05:40
SPEAKER_02: and then maybe we'll see a better cleanup and a move towards,
1:05:43
SPEAKER_02: as Fred has also mentioned,
1:05:44
SPEAKER_02: a move towards the MTRS,
1:05:46
SPEAKER_02: because we're not seeing much time,
1:05:48
SPEAKER_02: and I don't find that happening in the next bill.
1:05:51
if we don't achieve the revenue collections as we see as
1:05:55
intended in the tax
1:05:57
SPEAKER_02: expansion,
1:05:58
SPEAKER_02: because that's the whole aim of the bust is to do the tax expansion.
1:06:02
SPEAKER_02: But we are yet to see that if that will actually work.
1:06:05
SPEAKER_02: Thank you, Eric.
1:06:07
SPEAKER_02: So for me,
1:06:08
SPEAKER_02: my thought on the Finance Act of 2035 would be,
1:06:12
and in comparison with the bill of 2024 that didn't make it to
1:06:16
become an act,
1:06:17
one thing that was loud or something that was seen clearly was
1:06:21
that there were not
1:06:22
SPEAKER_02: many changes on employment income,
1:06:24
SPEAKER_02: that is pay as you earn,
1:06:26
probably because the effect would have been felt directly by
1:06:28
the people and also
1:06:30
probably touching on the reactions that came up from the
1:06:34
finance bill of 2024.
1:06:35
SPEAKER_02: However,
1:06:36
we still note a number of changes that are touching especially
1:06:40
companies and
1:06:41
SPEAKER_02: specifically investors.
1:06:43
SPEAKER_02: So I feel like are we not focused on having investors come to Kenya or
1:06:48
Why are our laws not aligning with encouragement or in giving
1:06:52
incentives to
1:06:54
especially high capital investors who in the long run results
1:06:58
to our economy
1:06:59
SPEAKER_02: developing?
1:06:59
SPEAKER_02: But besides that,
1:07:00
SPEAKER_02: I think just to agree with JINNA,
1:07:02
a cleanup or a betterly done cleanup will be required just to
1:07:06
ensure that the
1:07:06
SPEAKER_02: provisions are clear and there are no contradictions in the law.
1:07:11
SPEAKER_02: So otherwise,
1:07:12
it's an act that we look forward to see how it will be
1:07:15
implemented in the near
1:07:16
SPEAKER_02: future and the repercussions that will arise,
1:07:19
SPEAKER_02: especially from the regulations that we are waiting to see in six months.
1:07:23
SPEAKER_02: Thank you.
1:07:24
SPEAKER_01: Thanks to my co-panelers, Jean and Agnes.
1:07:27
SPEAKER_01: So for me, it's probably just...
1:07:29
Maybe to appreciate the policy makers in terms of some of the
1:07:32
changes that we have
1:07:33
SPEAKER_01: actually seen.
1:07:33
SPEAKER_01: I think maybe for the first time in a long time,
1:07:36
we can actually see some tangible input from the stakeholders
1:07:39
being taken into
1:07:40
SPEAKER_01: account.
1:07:41
SPEAKER_01: I think we already have mentioned some of the proposals,
1:07:43
SPEAKER_01: such as the one that was impacting on personal data and trade secrets.
1:07:47
SPEAKER_01: run on agents and notices and quite a number of other couple changes that
1:07:51
SPEAKER_01: Parliament did not accept to move forward,
1:07:54
including the deletion of some of the critical products from
1:07:57
the first schedule and
1:07:58
SPEAKER_01: the second schedule as well,
1:08:00
which is a good gesture then because that means that someone is
1:08:03
listening to us.
1:08:04
SPEAKER_01: But having said that,
1:08:04
SPEAKER_01: of course,
1:08:05
SPEAKER_01: there are some areas of improvement that I believe that they can do,
1:08:08
SPEAKER_01: but I think it's a step towards the right direction.
1:08:10
SPEAKER_01: I look forward to a day when,
1:08:12
SPEAKER_01: as a country,
1:08:13
SPEAKER_01: we don't just rely on short-term views and putting things on Excel.
1:08:17
SPEAKER_01: Like,
1:08:17
SPEAKER_01: for example,
1:08:18
SPEAKER_01: saying that if we reduce the VAT rate from 16% to 15%,
1:08:20
SPEAKER_01: the impact will be,
1:08:21
SPEAKER_01: say,
1:08:21
SPEAKER_01: 100 billion.
1:08:24
by just looking at what you would have corrected without
1:08:27
necessarily considering
1:08:28
SPEAKER_01: the wider impact or what I would call the repo effects.
1:08:32
SPEAKER_01: When you reduce the rate from 16% to 15%,
1:08:34
SPEAKER_01: for example,
1:08:36
SPEAKER_01: there's also the impact that you are likely to create more jobs,
1:08:39
you are likely to increase a disposable income to your citizens
1:08:42
and quite a number
1:08:43
SPEAKER_01: of other factors that go in there.
1:08:45
SPEAKER_01: So I think
1:08:46
We should move from this conversation of just looking at the
1:08:49
impact in one year and
1:08:50
SPEAKER_01: not looking at the ripple effects of a certain change.
1:08:53
SPEAKER_01: It was good to see that debate happening in Parliament this time round.
1:08:57
SPEAKER_01: And we do hope that we'll,
1:08:58
SPEAKER_01: in a short while,
1:08:58
find ourselves in a place where we are not very myopic in terms
1:09:02
of looking at some
1:09:02
SPEAKER_01: of these changes.
1:09:03
SPEAKER_01: By looking forward into the future,
1:09:05
SPEAKER_01: my co-panelists have mentioned,
1:09:06
I think it would be good to see what the final act of 2026 will
1:09:09
come with or
1:09:10
SPEAKER_01: whatever miscellaneous piece of registration we have.
1:09:12
SPEAKER_01: But most importantly,
1:09:13
We hope to see some of the things that have been mentioned in
1:09:15
the medium-term level
1:09:16
SPEAKER_01: strategy,
1:09:17
SPEAKER_01: such as reduction of CIT rates,
1:09:19
review of the payee bards and reduction of the VAT rate and
1:09:22
some other good changes
1:09:23
SPEAKER_01: that are expected.
1:09:25
We hope to see them coming so that then it doesn't feel like
1:09:28
the government is only
1:09:29
SPEAKER_01: taking away from the citizens.
1:09:30
I think it would be good to see the Finance Act of 2026 will
1:09:34
actually be giving
1:09:35
SPEAKER_01: back to the citizens and most importantly also to have changes.
1:09:39
SPEAKER_01: that are geared towards spurring the economic activity in the country.
1:09:44
SPEAKER_01: Thank you, Makaya.
1:09:45
SPEAKER_00: Just one question, Fred.
1:09:46
SPEAKER_00: Looking forward to 2026-27 in terms of planning,
1:09:50
where can Kenyans get their voice heard as we work towards the
1:09:54
2026 finance bill?
1:09:56
SPEAKER_01: I think the government has an elaborate calendar in terms of,
1:09:59
SPEAKER_01: for example,
1:09:59
SPEAKER_01: how the finance bills are published.
1:10:01
SPEAKER_01: I think sometimes in November this year,
1:10:02
SPEAKER_01: we do expect a call for public participation by the National Treasury,
1:10:06
where we then put in our comments in terms of how we would want
1:10:09
to see the tax
1:10:11
SPEAKER_01: environment take shape.
1:10:13
SPEAKER_01: There will then be other engagements with them sometime in March,
1:10:17
SPEAKER_01: in which then they'll publish the bill by 30th of April of next year.
1:10:21
And it comes back to the same cycle in terms of also submitting
1:10:24
to the National
1:10:24
Assembly and then having the bill go through Parliament and
1:10:27
then assented to by the
1:10:28
SPEAKER_01: president by that end of June of next year.
1:10:31
SPEAKER_01: So in my view,
1:10:32
SPEAKER_01: I think as stakeholders in this particular conversation,
1:10:36
what is important to us is then to analyze our tax laws that we
1:10:39
do have before us.
1:10:40
SPEAKER_01: And when it is the light time to make the submissions,
1:10:43
SPEAKER_01: then we engage the light people,
1:10:44
SPEAKER_01: and that's including the National Assembly.
1:10:46
So then we can shape the conversation in terms of what we see
1:10:50
in the Finance Bill of 2026.
1:10:52
SPEAKER_00: Thank you.
1:10:53
The key takeaway was that there are steps that we can take in
1:10:55
terms of being hard.
1:10:56
In terms of the various things that you want to change before
1:10:59
the Finance Bill
1:11:01
SPEAKER_00: 2026,
1:11:01
SPEAKER_00: it's published next year.
1:11:02
SPEAKER_00: Thank you so much,
1:11:03
SPEAKER_00: Giona,
1:11:03
SPEAKER_00: Agnes,
1:11:04
SPEAKER_00: Fred,
1:11:04
SPEAKER_00: and our host was Zamboko,
1:11:06
SPEAKER_00: who managed to guide the conversation very well.
1:11:09
SPEAKER_00: Twitter sometimes acts up, but the conversation was very informative.
1:11:12
SPEAKER_00: Thank you, our panelists.
1:11:13
Thank you,
1:11:14
our listeners,
1:11:15
for taking time this Wednesday evening to be able to listen in.
1:11:17
SPEAKER_00: On that note, I would say thank you once again.
1:11:19
Maybe Fred,
1:11:20
Agnes,
1:11:20
and Gina,
1:11:21
you can also say Kwaheri,
1:11:22
and then we can close up.
1:11:23
SPEAKER_01: Thank you, Makaya, and Kwaheri to our listeners.
1:11:26
SPEAKER_01: It was a great pleasure having these conversations.
1:11:28
SPEAKER_01: Looking forward to the subsequent ones.
1:11:30
SPEAKER_01: Thanks, Makaya, for the opportunity.
1:11:31
SPEAKER_01: Appreciate it.
1:11:32
SPEAKER_02: Thank you, everyone.
1:11:33
SPEAKER_02: Thank you, Eric and Amboko for this engaging conversation.
1:11:37
SPEAKER_02: Thank you to my co-panelists.
1:11:39
It has been an honor and a pleasure having this wonderful
1:11:43
conversation and look
1:11:45
SPEAKER_02: forward to many more.
1:11:46
SPEAKER_02: Thank you.
1:11:47
SPEAKER_02: Much thanks, Julianne, my panelists, Fred, and Jilna.
1:11:51
SPEAKER_02: Thank you all listeners for joining in.
1:11:53
SPEAKER_02: Looking forward to interact in more sessions in future,
1:11:56
SPEAKER_02: even as we continue to understand the laws,
1:11:58
SPEAKER_02: expenditures,
1:11:59
SPEAKER_02: and
1:12:00
SPEAKER_02: other matters that touch on our economy.
1:12:02
SPEAKER_02: Thank you all and have a good night.