Business News Kenya

Monday 6 May 2013

Tax on SME remains a Global Dilemma


International experience has proved that taxation of the Small and Micro Enterprises is a challenge to all tax administrations world wide. The case is more challenging in the developing countries which indeed host the lion’s share of SMEs .

 From available global statistics, the revenue yield from the sector is minimal, compliance is made difficult due to the cash based nature of the sector and further by virtue of having a very large number of players the probability of an enterprise being audited is remote. Compliance cost in the sector is thus high both for industry players and tax administrations.

 The traditional approach to taxing the sector is to use a presumptive tax system. This strategy has however failed to yield expected results in most cases. This therefore calls for new initiatives to raise the revenue yield for the sector, a factor which was alluded to in the recent report by the Parliamentary Budget Office. The principle objective of the initiatives is to unlock the vast revenue potential in the informal sector.

 In addressing the issue of taxation of the informal sector, the government introduced Turn Over Tax in 2009. This was aimed at drawing the informal sector into the tax net by simplifying tax procedures, record keeping and tax computation for small and micro enterprises, thus making it easy for them to file tax returns and reduce compliance cost.

Further, a deliberate effort was made to reduce the number of taxpayers in the designated VAT regime, which is more demanding and complex, by raising VAT threshold from three million to five million and subject them to turnover regime at three per cent of gross sales.

 Since its introduction, Turnover Tax has experienced mixed fortunes. Whereas there has been considerable increase in the number of taxpayers recruited, there has been no corresponding increase in its share of revenue contribution.

Several strategies have been put in place to address this shortcoming including enhancing enforcement effort to detect and deter non-compliance, educating Small and Micro Enterprises, further simplification of registration requirements for TOT, expanding scope for mobile phone based tax transaction, building sector specific capacity through the establishment of the Medium Tax Office and establishing linkages and partnerships with stakeholder organisations and financial institutions.

 In spite of all these efforts, revenue growth in the TOT regime is yet to compare favourably with growth in registration, This brings to focus the general low level of compliance in the sector.

The way forward for ensuring that TOT performs to expectation is continuous review and enrichment of strategies with the aim of ensuring capacity building in audit and inspectorate services, leveraging on emerging technology to provide a one-stop-shop for tapping vast revenue potential in the sector, participative setting of realistic targets and aggressive education of the sector on its tax obligations.

We are pleased with public enthusiasm to register for TOT but as expected, we are concerned about the revenue yield. We will work with industry players to reverse the latter.

Monday 4 February 2013

Blow to counties as KRA to be sole revenue collector



The National Economic and Social Council has proposed that the Kenya Revenue Authority remain the sole collector of government revenues, even as the country devolves power to the county governments.

During its 32nd full council meeting, the council said that county governments should only stick to management activities and instead called for the government to empower KRA with more resources to collect all taxes.

“The government should restructure and enhance the capacity of KRA in order to make it the single revenue collector,” said council’s chairman, Mr Vimal Shah. He was accompanied by Head of the Civil Service Francis Kimemia.

Currently the Constitution empowers counties to collect property and entertainment taxes; they can also impose charges (utility taxes) for their services such as water supply, garbage collection among others.
Expertise

The KRA Commissioner General has already indicated that they will offer their revenue collection services to counties like Nairobi given that they have the expertise and know-how to collect and impose taxes.

He said that the authority had started sending out some of its officers to various counties in preparation for their new governments.

Finance minister Njeru Githae has seconded the proposal and urged that the revenue collecting responsibility remain the sole function of KRA, even calling for it to be given more resources to enable it to undertake the bigger responsibility as counties come into effect on March 4.

Source: Daily Nation 

Wednesday 16 January 2013

Team to Assess S Sudan EAC Entry Bid


The East African Community (EAC) is expected to send a team to South Sudan to assess the country’s readiness to join the regional bloc later this month.
EAC secretary general Dr Richard Sezibera said the team will vet South Sudan for entry into the customs union territory.
He was speaking during a meeting with German parliamentarians on a visit to the Community’s headquarters in Arusha on Monday.
“We want to know whether South Sudan is willing and able to open its markets to the rest of the community,” said EAC spokesperson Owora Othieno.
Adopted in 2005, the Customs Union Protocol establishes a single external tariff for goods coming into the Community. It also abolishes internal tariff and non-tariff barriers to trade within the region.
South Sudan, Africa’s newest state, applied for entry in the EAC months after its independence from Sudan last year.
In April, Heads of State from the five EAC countries deferred their decision on the application until November this year pending a verification process.

Kenya Set to Register Businesses Online


Finance minister Njeru Githae has told Parliament that Kenya is set to roll out the electronic registration of businesses within the next three months.
The MP said the e-registration will ensure that investors have an easy time setting up businesses in the country.
He added that a Bill –Business Regulation Bill-- to simplify the process was in the works and will make it to Parliament as soon as possible to make that dream a reality.
Julius Kones (Konoin) had noted the long processes and multiple licenses required to set up and operate business in the country, saying they had made Kenya less attractive for foreign and even local entrepreneurs.
“Why does the government require a Bill to set up an e-registry when you already have a government policy on e-governance?” posed the Konoin MP.
Dr Kones said that the 2011-2012 Doing Business Report that was prepared by the International Finance Corporation and the World Bank had passed an indictment on Kenya as an investment destination. Kenya was ranked number 109 in the world.
“What reform measures has the government taken to simplify payment of taxes and regulations for investors and what achievements have been made in improving the business environment to attract new investments in the country?” posed Dr Kones.
It is then that the Finance minister said that the government was aware that the business regulation environment was haphazard and that the processes too were inordinately long.
Mr Githae said he banked on the Bill to bring changes to the circumlocutory practices and woo investors into the country.
The main problem, the minister said, is because of the many regulatory authorities – the public health, the national environment management authority, the local authorities and the ministry of trade are just some of those whose licenses are sought before investors begin business.
“We need a change of attitude in this country. When an investor comes, we should rush to him, because he’s doing us a favour by coming to invest in this country. We should not put so many roadblocks on the investor’s way,” said Mr Githae.
John Mbadi (Gwassi) asked the minister to ensure that tax payment and compliance are all put online.
Mr Githae said that the Kenya Revenue Authority (KRA) was slowly taking up automation of most of its services.
“Nowadays, there’s no need of filling those bulky forms. Once we automate all this, we will sort out our business procedures,” said Mr Githae.
He revealed that the registration of business had been shortened from two months to a month, and the goal at the Registrar of Companies was to have that period shortened to 14 days.
“We’re not out of the woods yet,” said the minister.
The minister added that a committee had been set up to ensure that businessmen do not suffer when registering their business.
Erastus Mureithi (Ol Kalou) said the minister had packed the committee with government appointees, but the minister said, there were three slots for the private sector to inform the government on the woes of businessmen.

Friday 11 January 2013

KIBAKI legacy is too Cosmetic

I call us a Prozac nation because I am amazed at how much Kenya has continued to backtrack but each time, the Leadership headed by none other than Kibaki gives you all a small dosage of Prozac and you forget your troubles. Your depression is replaced by a plastic smile which only lasts until the next shot. For me to really make you guys remember how much we have been sleeping as a country, I will take a facts only, references only, statistics only approach to convince you that Kibaki and Kenyans in general are asleep. Simply put, here are some 5 pillars of economic growth as per vision 2030. I will however center my argument on the pillar number 5 which anyway props up the other 4. Without a Financial Sector that is functioning, there is no 1, 2, 3 & 4.
I - Tourism
II - Agriculture
III - Wholesale and retail trade
IV - Manufacturing IT enabled services (previously known as business process off-shoring)
V - Financial services and Housing

Kenyans still pay the highest interest rates in the world. At 20.34 in March 2012, we were only doing worse than 3 countries in the world, Zimbabwe 975%, Sao Tome & Principe 28%, Venezuela 28.5%. Taking a mortgate in the country at the average rate of 24% to build a house worth 5 million shillings out of which you put the least possible downpayment of 1% (technically impossible), in 10 years you would have been paying a monthly fee of Ksh.119,609.1 which translates to 14,353,000 total paid back over 10 years. Who in his correct mind is willing to enter this deal? Okay to put more perspective, compare with someone in some sheet African country……hmmm………..hmmmmm…….okay Gabon 5.25%, Equitorial Guinea 5.25% and Chad 5.25% even the war-loving Congo 5.25%. These guys for the same house will be paying KES 53,109.39 which translates to a total Ksh. 6,373,126. For every one house I can buy with a 5,000,000 shilling mortgage over 10 years, the former child soldier in Congo can buy two! The guy in Italy can buy 3 if he adds Ksh 647,000.

In other words, in Kenya, our financial system forces people to have ready cash if they want to build a house affordably. This means that only the rich (not even middle class) can afford homes. The rich will of course raise rents because of the special throne they sit on and more of you will continue moving into Kibera, Gachororo, Mathare, Kariobangi, Korogocho, Baba Dogo and all these places the government says are beyond help but yet the solution is simple.

When you do not have financing how are you going to build a hotel? Why do you think the best and biggest upcoming hotels in the coast are from Italian owners? Italians can borrow money from their financial system at 0.75% that is not even a 1% and invest it anywhere and on anything on our so called blue-planet; earth. Italians are here laying our chics at the coast and refusing to let us into the hotels even if we had money to pay for the meals. Kenyan companies, restaurants, boutiques and entertainment spots are being taken over by foreigners who have borrowed cheap. Wewe bado umesimama Githurai interchange admiring Kibaki’s work! Do you even drive? I do drive! I drive my mom’s hand it down car Datsun 1200!! I cannot even offer a chic a lift she’d think I am on Prozac.

Simply said, without a sound financial system there is no investment in Agriculture, (flower farms in Kenya are lately owned by Norwegians, Dutch, Lithuenians, save for the tiny tiny ones in Tigoni and Juja. You all are singing here maendeleo this maendeleo that ooh development. You guys are all on Prozac. The fourth Pillar of vision 2030 is Manufacturing and IT. Why is the loud mouth, drooling, zero IQ run CCK not cracking down on high internet charges? Bitange is the only smart guy who gives me hope of sanity. For those of you who work online, freelancers and what what. You may have noticed that some jobs say “Pakistani contractors only should apply”. Why? These folk have very fast internet for very cheap its almost free and their stima is almost unpaid for. They can do for a dollar what a Kenyan would need 5 dollars to do. Yes these are the guys we are competing against if Vision 2030 is to become reality. If Konza and Tatu city were to work out, we would need a strategy to beat Pakistan, India, South Korea, Malaysia. Kibaki the economist does not know that access to credit is access to investment, which in turn is access to income which is access to savings so that someone else can borrow. Kenyans keep being duped by small small syokimau type projects ever 2 years to cheat people that we are working. Depressed people who are smiling coz of drugs. Prozac nation!!!

References

1) CBK Rates and Statistics 2012 http://www.centralbank.go.ke/index.php/rate-and-statistics/interest-rates-2?yr=2012
2) Property Kenya Mortgage Calculator http://www.propertykenya.com/mortgage_calculator.php
3) List of Countries by Central Bank Interest Rates http://en.wikipedia.org/wiki/List_of_countries_by_central_bank_interest_rates
4) Hass Consult, List of Local Banks Mortgage rates http://www.hassconsult.co.ke/images/Quarter12012Special_Report.pdf
5) About the Anti Depressant, Prozac http://en.wikipedia.org/wiki/Fluoxetine

Thursday 10 January 2013

Stock exchange sees KSh. 18bn increase in investor wealth


Investor wealth at the Nairobi Stock Exchange shot up by KSh. 18 billion in Monday’s trading in a session that pronounced yet another day of high foreign investor demand that pushed prime stocks to new highs.
The Nairobi Securities Exchange (NSE) saw an increase in capitalisation which went up from KSh. 1.326 trillion from the previous day’s KSh. 1.308 trillion.
The main drivers of the market continued to be foreign investors who accounted for 55 per cent of Tuesday’s trading.
Johnson Nderi, a research analyst at Suntra Investment Bank, said that foreign investors were bullish on key stocks and were willing to buy them at the existing prices. He added that foreigners were underwriting the market which helped sustain the high prices.
Stocks of Safaricom, Standard Chartered, BAT, East African Breweries Limited (EABL), and Athi River Mining continued their share appreciation which helped the NSE 20-Share Index to move closer to the 4,300 point mark. The NSE 20-Share Index closed at 4,247.74 points on Tuesday which was up from Monday by 35.26 points.
BAT share prices touched another 52-week high at KSh. 510, EABL also touched a new high at KSh. 295, while Safaricom was KSh. 5.85, Standard Chartered at KSh. 242, and Athi River Mining was at KSh. 52.
Safaricom which closed at an average of KSh. 5.60 saw a 4.67 per cent increase from KSh. 5.35 while its market capitalisation increased by KSh. 10 billion from KSh. 214 billion to KSh. 224 billion.
More than half of the KSh. 18 billion total increase in investor wealth was on account of the foreign demand on the telecoms’ stock. Moses Waireri, a research analyst at Genghis Capital was of the opinion that the rising stocks such as BAT, Safaricom, and EABL were driven by foreign investors.
He also said that the extended gains could indicate that buyers expect a smooth transition in the forthcoming General Election which is normally expected to have a negative effect on the stock market.
A peaceful hand-over of power would influence flows into the NSE that would signify a wider economic performance. Such inflows would broaden the NSE’s strong performance of 2012 that made it one of the highest performing stock exchanges in the world.
The NSE 20-Share Index gained 28.95 per cent in 2012 and closed at 4,133.02 points as compared to 3,205.02 points in 2011.

Source : Kuzabiashara

Tuesday 8 January 2013

IMF warns African countries of ECONOMIC UNCERTAINTIES and rising FOOD PRICES


While it appears that the leaders in some African countries are busy building their own “private” economies by lacing their pockets with public funds, the International Monetary Fund (IMF) has called on African countries to have strong macroeconomic framework and improved institutional capacity against the backdrop of global economic uncertainty and rising food prices.

IMF Managing Director, Christine Lagarde, gave this advice at the conclusion of a visit to Malawi, saying since African countries had become increasingly integrated into the rest of the world, there was need to ensure sustainable and inclusive growth in order to maintain the impressive economic performance of the last 10 years, stating that the IMF would continue to assist them in these vital efforts.

IMF warns African countries of possible rise in FOOD PRICES
Lagarde assured that the IMF would continue to support Malawi with technical assistance, policy advice, financial assistance under the programme supported by the Extended Credit Facility and training to strengthen capacity in macroeconomic management.

According to her, “Malawi’s recent economic situation has been difficult. Drought and lower-than-expected foreign exchange earnings have dampened growth and contributed to a spike in inflation in 2012. Notwithstanding the current hardships, many of my interlocutors are confident that the ongoing reforms will turn the economy around, an optimism that I share.”

The IMF boss further said that the present government’s bold economic policies, including the liberalisation of the foreign exchange market were a welcome development, stating that continued assistance from development partners would be essential to support the government’s reforms: “I welcome the government’s efforts to address the unforeseen challenges through her continued commitment to economic reforms. Malawi has already made significant progress in addressing the serious imbalances that were hampering economic growth just a few months ago,” she declared.

“I also stressed the need to stay the course, while putting in place social protection programs to alleviate the impact of the adjustment measures on the poorest households. Continued assistance from development partners will be essential to support the ongoing reforms,” she stated.

Monday 7 January 2013

Yahoo! CEO losses job over fake CV entry


Updating your CV is important and calls for openness. I was just going through this one year old article and though it better to share. Be keen. Happy business.

 Internet giant Yahoo! let go of their third CEO in three years after one shareholder discovered Scott Thompson had ‘padded’ his CV to indicate a non-existent Computer Science degree.


Daniel Loeb, head of Third Point LLC – Yahoo’s largest shareholder, raised the alarm on Thompson’s CV, which analysts say led to his resignation after only four months at the helm.


Yahoo media chief Ross Levinsohn will be named interim CEO, the company said.


Exaggerated qualifications on a resume is not new but with the corporate world becoming more interconnected, chances of getting away with a fake CV is becoming thin.

Below are some of the top resume and interview fabrication, according to Chicago-based outplacement consultancy Challenger, Gray & Christmas:

Education: Listing a degree from a school never attended; inflating grade-point average and graduate honors; citing a degree from an online, non-accredited “education” institution


Job Title: Making up a title or boosting an actual title by one or more levels in order to get better salary offers.


Compensation: Inflating current or previous salary and benefits to secure more money from a prospective employer.


Reason for leaving: Saying it was a mass downsizing when the discharge was based on performance.


Accomplishments: Overstating one’s contributions to a team project or company performance; claiming to have received a special recognition; exaggerating the level of participation in an important aspect of the business

Source: yahoo news.

Lending rates likely to remain static this year


An economic analyst has ruled out on any possible rise in the Central Bank Rate (CBR) after next week’s Monetary Policy Committee meeting. Expectations from borrowers who feel that banks will reduce their lending rates in line with the expected drop in the CBR are high.

Independent financial analyst Aly Khan Satchu says that the CBK has a possibility and the ability to reduce these rates to as low as a single digit from the current 11 percent due to the constructive economy especially with the continued drop in inflation.

The inflation rate in December reduced to 3.20 percent down from 3.25 in November.

According to him, the CBR is 780 basis points above the Inflation Rate and this gives the MPC room to sail through. He further states an expected minimum of 100 basis points.

Some measures being considered by the financial regulator consider while making changes in the CBR, are, the inflation rate, the exchange rate, liquidity, and a rise in Gross Domestic Product, all of which look positive to him.

He nonetheless argues that the MPC maybe be a bit cautious to lower the CBR and instead settle on keeping it at percent.

"The MPC might not care to pull the trigger so early in the year,” Satchu added.
Furthermore, he has the opinion that banks still have numerous excuses as not lower their lending rates despite the continued drop in CBR.

"Lending rates have remained stubbornly high. The banks followed the Central Bank on the way up and with alacrity but have been very slow to follow the Central Bank downwards. And these high lending rates have proven a steep toll charge on the economy as evidenced by the weak GDP outcome notwithstanding a little bounce in quarter three,” he said.

Kenya Bankers Association CEO Habil Olaka on the other hand feels that the CBK may decide to maintain its rate and first watch the economical risks especially associated with the coming general elections.
He said maintaining the rate would also be a signal of economic stability.

“You know the committee does its review after every two months so it may decide to see how the campaigns go. I also urge the banks to not only wait for the CBR rate changes, but focus on other measures to enable them lower the lending rates,” Olaka said.