PKF proposes private hospitals to be allowed to import COVID 19 vaccines
By Douglas Muriithi
PKF has urged the government to put in place mechanisms to allow
private hospitals to import vaccines in order to compliment
government efforts.
The audit firm in its pre-budget report wants the government to
prioritize the vaccination programme by allocating more resources
for this purpose.
“There is no certainty as to how long it will take for the pandemic to
come to an end. However, it is clear that countries that have
initiated widespread vaccination programmes are in a better
position to re-open their economies fully,” the report notes.
PKF is calling for restructuring of the country’s debt to match the
life of key ongoing projects to avoid getting into a debt trap. It
recommends alternative sources of financing such as the public
private partnerships..
Kenya’s debt has ballooned over the last few years with 50% of the
debt being foreign,and therefore the stability of exchange rates will
play a big role in sustainability of these debts going forward. Most of
this debt has been expended towards big infrastructural projects
whose benefits will be realized in the long term.
Big data necessary to achieve the big 4 agenda
PKF is recommending the Creation of a national database by the
government as a reference point for national development
initiatives.
The end users will refer to the database to inform planning for the
Big 4 Agenda initiatives and other development programmes.
Accurate planning requires accurate data. The huduma
namba project rolled out in 2019 was meant to build and secure ‘big
data’ that is necessary for planning and making informed economic
decisions.
The Government targets to achieve national food and nutrition
security and in execution of this mandate, the government needs a
national database of farming households and subsequently all
farmers in the country. Achieving national food security will be
largely informed by a comprehensive register of all farmers in
Kenya.
The database will also assist in planning for achievement of
universal healthcare through provision of background information
needed for registration for provision of universal healthcare
services under the National Hospital Insurance Fund. The same
information will be easily accessible for use by relevant
stakeholders in the health sector. Accurate patient identification is
necessary in order to administer proper diagnosis and agenda.
The database will provide information on number of households
and number of family members. This will guide the policy makers
with the background information for assessment of status of
housing in the country. The information will be an authentic source
of civil data which is important for planning purposes in the
delivery of the Affordable Housing targets.
The database will generate biodata on persons’ employment status
and main occupation. Persons engaged in production of raw
materials are critical in providing the same for development of
industries which create employment. To attract investors in the
Manufacturing sector and spur growth in the labour market,
updated data on persons is needed for planning purposes.
Lack of a clear tax policy: PKF is proposing that the government
adopts a long- term and cogent tax policy. Kenya’s tax statutes it
notes are littered with annual/bi-annual amendments. Besides
creating room for additional tax collection, most of these changes in
tax lack a philosophical orientation. In some instances, taxes such as
betting tax which was scrapped in 2020 is now proposed to be re-
introduced just one year down the line!
Minimum tax: This tax was introduced by the Finance Bill 2020.
Subsequently this has been suspended by the High Court pending
full hearing on its constitutionality. Minimum tax was ill-advised as
it has the impact of crippling both small and large businesses,
especially those businesses with high turnover but low margins,
large capital outlay and those that have huge capital allowances.
The Government should re-think the practicality of this tax besides
its constitutionality.
VAT on essential goods: The Finance Bill 2021 proposes to introduce
VAT on bread at a time family have lost income, businesses have
collapsed, and the worst is still beckoning, yet the government find
it fit to tax bread- which due to lack of an alternative has become a
majority of Kenyans staple food.
VAT on exported services: The 2021 Finance Bill proposes to change
the classification for exported services from zero-rate to exempt.
This change means that suppliers of exported services will not be
allowed to claim their input VAT thus making such supplies a lot
more expensive. This is against international best practice as
recommended by the OECD and practiced by almost all countries in
the world. The proposed change contradicts government’s effort of
implementing the Konza city dream- a dream that seeks to make
Kenya Africa’s Silicon Valley. By changing the zero-rated status of
export of services, the government is loudly pronouncing the death
of konza city dream. No investor would gamble their money at
konza if they will suffer additional VAT under the proposed new tax.
It is time for Treasury to enact a clear and cogent tax policy for the
country.
Withholding VAT exemption: The Bill proposes to scrap the legal
regime for exempting companies that are in perpetual VAT refund
from the withholding VAT regime. This means that such companies
will accumulate huge VAT credits/refunds for which they have to
wait for a long time to utilize or they have to apply for a refund
later on. This will further complicate vat refunds backlog since KRA
has not been able to settle these in good time. This will
unnecessarily and unfairly deny businesses their rightful funds
which are necessary to support their operations especially during
thepandemic hence mitigate the disruption caused to our economy.
VAT exemption tariff chapter 84 and 85: The Finance Act 2020
introduced VAT on machinery of tariff chapters 84 and 85. These are
heavy machinery required for our industrial success. As a result,
many businesses will end up with huge input VAT credits that will
result in significant VAT refund claims that are never processed and
paid on time by KRA. The cost of deploying big projects will rise as a
result since businesses are now forced to borrow in order to
finance VAT.
Common Reporting Standards: The Finance Bill 2021 proposes to
introduce regulations to govern the common reporting standards.
The Common Reporting Standards were developed by the OECD to
tackle illicit flow of funds, tax evasion and improve tax
transparency and compliance. This means that offshore bank
accounts for Kenyan residents will now be accessible to the KRA.
Strict sanctions have been proposed for non-compliance with
reporting obligations by financial institutions. This is a very
welcome proposal asit will help to addresse the endemic issue of
corruption.
Country-by-Country reporting: The finance Bill has proposed to
have Kenyan multinationals disclose transactions in foreign
jurisdictions. This is aimed at giving visibility to KRA on tax affairs
of these Kenyan multinationals in all jurisdictions they operate in.
Government needs to consider extending the CbC reporting
requirements to also cover non-Kenyan multinationals.
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