ecstacy wrote:So instead of joining the online Kenyan ranting regarding the VAT 2013 Bill, maybe we share and propose some solutions to anyone who cares to listen? I'm no economist, but how about the following:
1. Kenya's annual recurrent expenditure has hit the one trillion shilling mark up by Ksh.340B - we have to SLASH it from the top down (this was before MPs, teachers, Governors, Senators demands get into the pic). I am sorry, some Kenyans rich and poorer will need to go home or take salary freezes if not time cuts for lower pay or work twice as hard for the same pay.
2. Increase the tax base. If you a landlord and you not paying tax, pls don't go whinin about VAT on milk. If you are an employer who has been deducting employee dues and not remitting them to KRA, STFU. If you are a consultant not remitting witholding tax, nyamaza etc
3. The value of the balance between imports and exports has to improve as we importing twice the value of what we are exporting (Ksh 1.3T v 518B). It means in the immediate term resuscitating local industry and providing investors with incentives. Spending more (requiring more tax) in the immediate term to achieve mid-long term objectives.
4. Strengthen accountability across all arms of government. Legislate economic crimes if we have to. Corruption has to be seen to be punished.
5. Phase out/stagger Jubilee new government spending programmes in the social sector.. Scheduled to go up to 41.1% i.e. by Ksh. 421B
6. Go after firms engaging in transfer pricing. This may mean job cuts for some, firms relocating but in the longer term, the economy retains taxes generated from poisoning of it's environment and exploitation of its workers. The horticulture flower farms lead the pack in tax evasion.
7. Reduce defence spending. Quick gain perhaps, are there any strategic interests left in remaining in Somalia now?
All these measures are hardest on the bottom of the pyramid so if we complain about milk then let us be ready to swallow the bitter pill of solutions.
What are yours?
9. Review Tax Breaks for foreign firms
In relation to tax collection by way of radical suggestion, it is time the GoK considered publish a costing and justification for each incentive offered, followed by monitoring of conditions and a tally of costs and benefits, so the public can see the impact of tax incentives.
An ActionAid report released this July 2013 showed that Kenya gave up $123 million (Sh10.5 billion) under the generalised corporate tax incentives based on the 2008/2009 financial results. This equals 21 per cent of the corporate tax collected in the same year...
OK, do we know how much we did actually get in return???
Foreign firms are supposed to pay 37.5 per cent of their profits as tax, with locals paying 30 per cent. A further $120 million (Sh10.2 billion) was lost through incentives to exporters and $68 million (5.8 billion) through Special economic zones.
Sarah Muyonga, a Tax consultant said this is despite the fact that such incentives have not translated into any surge in Foreign Direct Investment as intended.
"Uganda gives less incentives than Kenya, but attracts more FDI. Investors are not entirely enticed by these tax incentives," said Muyonga. The ActionAid report said the use of tax incentives by the government has dramatically increased from about 4 per cent of the firms to over 40 per cent between 1980 and the present.
"It is worrying wooing investors with unclear incentives such as land deals, tax breaks and other unclear tax deals to set up business in their countries. These create loopholes for corruption and give unfair competition to the domestic investors," Muyonga said.
It is time the GoK considered publish a costing and justification for each incentive offered!!
Ref 1
http://www.actionaid.org...x-free_deals_21_aug.pdf
Ref 2 -http://www.the-star.co.ke/news/article-127456/kenya-losing-sh100bn-tax-foreign-firms