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Few options left to Rotich on taxes : The Standard

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Treasury Cabinet Secretary Henry Rotich. [File]

Kenyans will be staring at increased taxation when the national budget is unveiled before Parliament on Thursday.

Besides a possible raise in value added tax (VAT) from the current 16 per cent – the lowest among the East African Community nations – other likely targets are the betting industry and capital gains tax, which targets the wealthy.
Uganda and Tanzania, whose budgets will also be unveiled tomorrow, charge 18 per cent VAT.
Taxation experts, after a lengthy review of the options available to Treasury Cabinet Secretary Henry Rotich, are predicting the VAT increase given the country’s lower rate.

SEE ALSO :We have no money for parties: Rotich

Any marginal increase in VAT, which is an indirect tax that is lumped on the cost of nearly all goods and services, could be the silver bullet in a tough year that has seen Mr Rotich set an extremely ambitious tax revenue target of Sh2.2 trillion up from Sh1.9 trillion.
Experts agree that Rotich’s Sh3.02 trillion budget would benefit from reducing waste and plugging revenue leaks.
Bowmans Director Nikhil Hira, a long-serving tax practitioner, said he expects an increase in several prevailing tax rates rather than an introduction of new levies due to Rotich’s inability to catch tax evaders.
Mr Nikhil said he feared that targeting existing taxpayers with rate hikes would be counterproductive as it would encourage tax dodging.
“It is very detrimental to go after the same people, year in year out. This would not solve the (revenue) problem in the long run,” he said.

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Nikhil noted that the urge to spend by the Government was not in tandem with its capacity to collect additional taxes. This, he added, had only translated into an insatiable appetite to borrow and an imminent debt repayment crisis.
“I am a little concerned that Rotich will increase rates, though my personal view is that slashing tax rates would encourage consumption, and ultimately, more revenue collection.”
Nikhil told The Standard that it was during the times that Kenya eased its tax rates during the mid-1990s that revenue collections soared fastest.
Finance Minister Musalia Mudavadi oversaw the reduction of income tax and corporation taxes by half, helping book the fastest growth rates in history.
“The growth for the years was a steady 45 per cent, which is attributable to higher compliance when tax rates are friendly,” Nikhil said.

SEE ALSO :World Bank rewards counties for prudent funds use

And to qualify his rather counter-intuitive take on lowering taxes to raise revenues, the director cited the harmful impact on consumption following the levying of eight per cent excise duty on petroleum products.
Motorists reacted by reducing their consumption whose ripple effect was reduced excise collections. This was besides the VAT charges and subsequent road maintenance levy applied on every litre of fuel sold.
Nikhil’s fear about an increase in taxes was shared by another taxation expert who stated his belief that Rotich would target the poor and rich equally.
Andersen Tax, Kenya MD Philip Muema said the options available to the CS are minimal outside of stiffer taxes considering the huge size of the national budget to be funded and the declining opportunities for borrowing.    
“I am certain that new taxes are inevitable,” said Mr Muema.

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SEE ALSO :Rift counties score highly on prudent funds use

And unlike previous years, the repayment of foreign debts is projected at Sh800 billion which is half of the more realistic revenue collection by Kenya Revenue Authority.
The Government’s scope for borrowing to finance the budget has narrowed, given fatigue among potential lenders amid soaring concerns about the country’s ability to repay in the near future.
“You can expect that Rotich will double the capital gains tax to 10 per cent, which is still the lowest in the region,” Muema said.
On gambling, Muema said that the position held by Interior CS Fred Matiang’i on erecting stricter betting controls would inform new taxes, which would act as a deterrent as well as a cash cow.
But more immediate concerns about raising tax rates include the possibility that consumers will be unwilling to spend.

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Cabinet Secretary Henry RotichVATParliament

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Africa to post negative growth for first time in 25 years : The Standard

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Covid-19 is driving sub-Saharan Africa towards its first recession in 25 years. 
According to the latest Africa’s Pulse, a biannual update on the region published by the World Bank, growth is forecast to fall from 2.4 per cent last year to between negative 2.1 per cent and negative 5.1 per cent in 2020.
In its analysis, the World Bank expects Covid-19 to cost the region between $37 billion (Sh3.9 trillion) and $79 billion (Sh8.4 trillion) this year.

SEE ALSO: China virus cases spike, 17 new infections reported

The factors behind this drop in revenue include disruptions to trade, especially for countries that rely heavily on commodity exports; a drop in foreign financing as sources like remittances and tourism dry up; and the disruption to business as governments institute measures that restrict consumption.
“The Covid-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard,” said Hafez Ghanem, the World Bank’s vice president for Africa, in a statement yesterday.
“We are rallying all possible resources to help countries meet people’s immediate health and survival needs, while also safeguarding livelihoods and jobs in the longer term – including calling for a standstill on official bilateral debt service payments, which would free up funds for strengthening health systems to deal with Covid-19.”

For More of This and Other Stories, Grab Your Copy of the Standard Newspaper.  

The bank wants African government to put in place social safety nets that would boost food security, help workers who get laid off, and support small and medium businesses.
It recommends that regional policymakers institute measures that are cognisant of their economic realities, especially a reliance on the informal sector, high debt levels that limit their fiscal options, and their generally low operational capacity to respond to the health crisis.

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SEE ALSO: China confirms virus spreading between humans


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KPA Begins Search for New Managing Director

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The Kenya Ports Authority (KPA) has begun the search for a new Managing Director, following the resignation of Daniel Manduku on 27th March 2020, who is currently under investigation for corruption.

After the resignation, the Authority’s board of directors appointed Engineer Rashid Salim as the MD in an acting capacity.

In an advert signed by the board chairman, Joseph Kibwana, interested applicants are required to send in their applications on or before 24th April 2020.

The successful candidate will serve on contractual terms for an initial period of three years, subject to renewal based on performance.

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KPA Remits KSh18.7 Billion to Treasury in Special Dividends

Macharia Irungu Appointed KPC Managing Director

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Poll: 81pc of staff working from home unproductive

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Economy

Poll: 81pc of staff working from home unproductive

A woman working from the comfort of her house
A woman working from the comfort of her house. PHOTO | COURTESY 

About eight in 10 Kenyans believe that working from home is ineffective, a survey conducted by Consumer Insight Africa has revealed, even as employers increasingly ask their staff to work from home in the wake of the Coronavirus pandemic, which has drastically changed the way business is conducted.

The poll released Thursday shows that 81 percent of Kenyan workers interviewed are of the view that working from home is unproductive.

Only a meagre two percent felt productive working from home while three per cent of the 1,083 respondents said their productivity had remained the same. The survey was conducted between March 28 and 31.

This looks set to hurt the overall productivity of companies at a time when over 50 percent of staff in many firms are working from home to reduce the probability of spreading the virus which has infected 184 people and killed seven in Kenya. Another 13 have been reported as having fully recovered.

The findings also upend the ongoing thinking that working from home not only benefits employees by eliminating their daily commutes, but also increases productivity and leads to healthier lifestyles.

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It is viewed as a win-win situation that both workers and employers welcome on account of its flexibility and for its potential to improve work-life balance for employees.

“For 81 percent of office goers, working at home was ineffective with a skew to females and those in business,” says the Consumer Insights Africa poll released on Thursday.

About 85 percent of the female workers said they were unproductive while working remotely compared to males at 80 percent.

Self-employed workers offered a worse verdict on working from home with 85 percent saying they were unproductive compared 79 percent for those in employment.

Kenya has suspended international passenger travel, closed schools indefinitely, closed bars and golf clubs and imposed a daily dusk-to-dawn curfew as well as banning public gatherings to curb the spread of the virus that has infected 1.5 million people globally, killing close to 90,000. Another 34,000 have recovered.

On Monday, the government also barred movement into and out of the four counties most affected by the virus, including Nairobi, Mombasa, Kwale and Kilifi. Restrictions for Nairobi started on Monday and in the coastal counties on Wednesday evening.

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Tougher restriction on movements look set to hurt Kenya’s economic output, which analysts led by management consultants McKinsey & Company expect will shrink by five percent in what will represent a $10 billion (Sh1 trillion) loss if the coronavirus pandemic is not contained.

Sectors such as tourism and horticulture, the two leading sources of foreign exchange, have already been hit hard by the ban on international travel. The outbreak has also disrupted supply chains and local production.

Kenya’s economic growth is expected to slow down to three percent or less this year from an earlier forecast of 6.1 percent due to the economic shocks of the novel coronavirus, according to Treasury estimates. This is expected to lead to job cuts as well as under-employment.

Consumer Insight Africa says 21 percent of those polled have seen their incomes drop to zero since Kenya announced its first case of coronavirus on March 13. Another 61 percent have seen their income drop while 17 percent of those interview said their pay has remained unchanged. Only one percent of those polled have seen their income rise, reflecting the impact of the virus on workers’ pay.

A reduction in incomes invariably leads to depressed consumer spending and ultimately hits firms’ sales, not to mention a reduction in income tax collections.

Kenya announced tax cuts on March 25 including on corporation, personal income and sales levy for small and mid-sized traders, to protect the economy against the coronavirus

The tax changes, to be debated in Parliament on Tuesday, are geared at lowering the cost of basic goods while providing workers with additional income for spending to boost consumption.

Of the respondents who said their productivity had dropped as a result of working from home, 41 percent said they were spending more time watching pay TV and movies. Another 34 percent increased their spending on entertainment. On age distribution, more young employees said they were working remotely compared to their older counterparts. Some 86 percent of workers under 25 years said they were on out-of-office duty while 77 percent of those aged above 35 said they were working from home.

A lower productivity is a double loss to companies that have invested in tools like laptops and internet data to ease remote working.

As people disperse to their homes to work and study because of the coronavirus pandemic, taking their laptops and company data with them, cyber security experts say hackers will follow, seeking to take advantage and infiltrate corporations.

Many workers are moving their employers’ data from professionally-managed corporate networks to home Wi-Fi setups protected with basic passwords.

Some organisations are loosening restrictions to allow employers to access work-critical information from their home offices, heightening the risk of information being leaked or data being compromised.

Working from home might expose employees to lower-tech threats too, including theft or loss of electronic equipment or plain human error by employees adjusting to a new environment and way of working.

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