PKF partner Michael Mburugu during a proposal for private hospitals to be allowed to import covid-19 vaccines. PHOTO /DOUGLAS MURIITHI

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






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






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






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






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






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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