# Finance Act 2025

An episode of [The Mwango Capital Podcast](https://invisiblenetwork.ai/podcast/1583367792), 25 Jul 2025, 1 h 12 min.

Audio: https://api.substack.com/feed/podcast/169211419/8cbd6a2a4c6775ddcc02997c1edf9709.mp3

In this episode recorded on 02.07.2025 and hosted by Julians Amboko, we break down the Finance Act 2025 and what it means for you. Guests: * Agnes Gitau - Tax Manager, Andersen Tax Kenya * Jilna Shah - Tax Director, RSM Eastern Africa * Fredrick Kimotho - Associate Director, Tax & Legal, Deloitte East Africa Subscribe to get notified when we make a new post. Show Notes 00:00:00 Introduction 00:03:19 VAT Changes 00:09:30 Unstable VAT Regime and Fraudulent Claims 00:14:12 KRA’s Clawback Powers 00:18:26 Medium Term Revenue Strategy 00:21:35 Tax Procedures Act 00:31:31 Refund Processing and Filing of Objections 00:37:48 Withholding Tax on Freight Income and Tax Amnesty 00:42:05 Advanced Pricing Agreements and Significant Economic Presence Tax 00:49:36 Repeal of Digital Asset Tax 00:52:53 Investment Allowances and Carrying Forward of Losses 01:00:10 Betting and Gaming Withholding Tax 01:04:34 Closing Remarks Get full access to The Mwango Weekly at mwangocapital.substack.com/subscribe

## Transcript

[0:00] SPEAKER_03: Ladies and gentlemen, greetings from wherever you're joining us from.
[0:03] It's a delight to have you as part of this conversation where
[0:06] we want to take a
[0:07] SPEAKER_03: deep dive into Kenya's Finance Act 2025.
[0:12] SPEAKER_03: In case you don't have context around this,
[0:13] the Finance Act is the piece of legislation that is designed by
[0:18] Kenya's public
[0:18] SPEAKER_03: finance architecture for the generation of revenue every fiscal year.
[0:30] SPEAKER_03: proposals for revenue raising measures,
[0:32] where we see tweaks and adjustments here and there across a
[0:35] raft of pieces of tax
[0:37] SPEAKER_03: legislation.
[0:38] SPEAKER_03: To help me take a deep dive into this conversation on Finance Act 2025,
[0:44] SPEAKER_03: I have Fred Kimoto,
[0:45] SPEAKER_03: Associate Director,
[0:46] SPEAKER_03: Tax and Legal at Deloitte.
[0:48] SPEAKER_03: Later on, I'll be giving them a chance to introduce themselves.
[0:51] SPEAKER_03: I also have Jill Lashar, Tax Director at RSM East Africa.
[0:54] SPEAKER_03: And finally, Agnes Gitao, Tax Partner at Anderson Tax Kenya.
[1:00] The way we shall navigate this conversation is that we will
[1:03] begin with a focus on
[1:04] the changes in value added tax and the reason why we shall be
[1:08] kicking off with VAT
[1:10] is because a lot of the conversation on Finance Act 25 has been
[1:14] around the cleanup
[1:15] SPEAKER_03: of the first and second schedules of the VAT Act,
[1:18] SPEAKER_03: focusing on exempt status and zero-related status.
[1:22] SPEAKER_03: After that,
[1:22] we shall transition into a conversation on the Tax Procedures
[1:26] Act and the changes
[1:27] SPEAKER_03: which are coming to amendments to that use of legislation,
[1:30] another significant portion of Finance Act which elicited so
[1:34] much debate in the
[1:35] SPEAKER_03: public participation phase,
[1:38] And we shall close with a conversation on changes to income tax
[1:42] and excise tax.
[1:43] SPEAKER_03: And that is how we shall be having our conversation tonight.
[1:46] SPEAKER_03: At the tail end, we shall have a Q&A session.
[1:49] SPEAKER_03: And that will take us to right about 9.30 p.m.
[1:52] SPEAKER_03: where we shall be dialing down with closing thoughts.
[1:55] SPEAKER_03: Having said the scene as such,
[1:57] I just wish to caution us that what we have seen thus far is a
[2:01] special settlement
[2:02] SPEAKER_03: coming from the Kenya Gazette office.
[2:04] SPEAKER_03: where we have seen a special notice which came out today,
[2:06] SPEAKER_03: giving us a glance into what we are seeing in Finance Act of 2025.
[2:10] SPEAKER_03: And of course,
[2:12] SPEAKER_03: we are only waiting to see the green copy,
[2:14] which of course will guide us on what's the final position for
[2:17] the Matters Finance
[2:18] SPEAKER_03: Act 2025.
[2:19] SPEAKER_03: I have set the stage.
[2:21] SPEAKER_03: Now let me invite my panelists to introduce themselves.
[2:24] SPEAKER_03: Starting off with Jim Lasha.
[2:25] Please tell us who you are,
[2:27] which institution you're affiliated to,
[2:29] and what you do there.
[2:30] SPEAKER_02: Thank you, Julian.
[2:31] SPEAKER_02: Good evening, everyone.
[2:32] SPEAKER_02: My name is Jilna Shah.
[2:33] SPEAKER_02: I'm a tax director with RSM Eastern Africa, handling tax as we speak.
[2:39] SPEAKER_02: Thank you.
[2:40] SPEAKER_03: Thank you very much, Jilna.
[2:41] SPEAKER_03: Let's cross over to Fred Kimotho.
[2:43] SPEAKER_01: Good evening, all our listeners.
[2:45] SPEAKER_01: My name is Fred Kimotho.
[2:46] I work with Deloitte East Africa as an associate director
[2:49] looking after tax policy
[2:50] SPEAKER_01: and tax controversy.
[2:51] SPEAKER_01: It's a pleasure to have this conversation.
[2:53] SPEAKER_01: Looking forward to an engaging one.
[2:55] SPEAKER_01: Thank you.
[2:56] SPEAKER_03: Thank you very much, Fred.
[2:57] SPEAKER_03: And finally, let's cross over to Agnes Gitao.
[2:59] SPEAKER_03: Please introduce yourself.
[3:01] SPEAKER_02: Thank you, Julius.
[3:02] SPEAKER_02: Good evening, everyone.
[3:03] My name is Agnes Gitao,
[3:05] a tax director at Anderson,
[3:06] where I handle tax matters for our clients.
[3:09] SPEAKER_03: Many thanks my panelists for introducing yourselves.
[3:11] We shall be relying on your guidance and insight to help us
[3:15] shed light into nuances
[3:16] SPEAKER_03: around finance act of 2025.
[3:19] SPEAKER_03: So let's kick it off.
[3:20] SPEAKER_03: Starting with value added tax.
[3:23] One of the major changes that we saw coming at the committee of
[3:26] the whole house
[3:27] SPEAKER_03: stage,
[3:28] and maybe just to take a step back and give context is the bill
[3:31] is stable in the
[3:31] SPEAKER_03: house.
[3:32] SPEAKER_03: It goes to the first reading,
[3:33] SPEAKER_03: second reading,
[3:33] SPEAKER_03: and then we go to the committee of the whole house where
[3:36] SPEAKER_03: We see a report coming from the Finance and Planning Committee,
[3:39] after which these amendments are taken to the floor of the
[3:41] House and we go through
[3:42] SPEAKER_03: a clause by clause amendment.
[3:45] SPEAKER_03: And that is where I'm starting from.
[3:46] We saw significant changes because the Finance Bill of 2025 had
[3:50] come with a
[3:50] SPEAKER_03: proposed drastic cleanup of the first and second schedules.
[3:54] SPEAKER_03: The first schedule dealing with VAT exempt status,
[3:57] SPEAKER_03: the second schedule dealing with zero-rated status.
[4:00] We saw the National Assembly differing with the National
[4:02] Treasury and saying,
[4:04] SPEAKER_03: whereas we want to address the headache of tax expenditure,
[4:06] SPEAKER_03: which is a revenue we forego,
[4:08] SPEAKER_03: we still have to retain some products on zero-rated status.
[4:13] SPEAKER_03: Let me start with Fred Kimoto.
[4:15] SPEAKER_03: Help us understand exempt, zero-rated, and standard-rated.
[4:19] And were you surprised by the U-turn we have seen when it comes
[4:22] to this cleanup,
[4:24] Fred?
[4:25] SPEAKER_01: Thank you.
[4:25] SPEAKER_01: Maybe to start us off in terms of what exempt means,
[4:28] SPEAKER_01: what's related means and what taxable at 16% means.
[4:31] SPEAKER_01: Basically,
[4:32] it means that if you're talking about taxable sales from a VT
[4:34] perspective is that
[4:35] SPEAKER_01: every sale will be charged at the rate of 16%,
[4:38] which then means that it has to be loaded on the price of the
[4:41] good or the service.
[4:42] From a zero-rated perspective is that you apply a zero-rate on
[4:45] the value of the good.
[4:46] SPEAKER_01: And of course, for exempt, it means that VAT is not applicable.
[4:49] The only main difference between exempt and zero-rated is that
[4:52] for exempt,
[4:53] SPEAKER_01: then you are not able to claim the input VAT.
[4:55] And that's why you will hear the argument that if a good is
[4:58] made to be exempt,
[4:59] SPEAKER_01: it becomes a bit more expensive than a zero-rated good.
[5:03] And you'll actually see quite a number of goods in the exempt
[5:06] schedule compared to
[5:07] SPEAKER_01: the zero-rated.
[5:08] Because also from a zero-rated perspective,
[5:10] which is something that Julian has mentioned,
[5:12] It also means that the government has to refund the suppliers
[5:15] who are supplying
[5:16] SPEAKER_01: generated goods,
[5:17] SPEAKER_01: the input VAT that they incurred,
[5:19] SPEAKER_01: the excess input VAT arising from such supplies.
[5:21] SPEAKER_01: So that's the main decision between the three.
[5:23] SPEAKER_01: Now, on to your question in terms of whether we were surprised or not.
[5:27] SPEAKER_01: First of all,
[5:28] SPEAKER_01: it's good to mention that if you look at just the first schedule alone,
[5:31] SPEAKER_01: and more specifically,
[5:32] SPEAKER_01: the first part,
[5:33] SPEAKER_01: it has more than 150 goods that are listed there to be exempted.
[5:37] SPEAKER_01: If you go to zero-rated schedule,
[5:39] you'll actually realize that it has more than 35 items that
[5:41] we're looking at in
[5:43] SPEAKER_01: terms of them being zero-rated.
[5:45] SPEAKER_01: Now,
[5:45] there's this broad pronouncement under the national tax policy
[5:48] and the medium-term
[5:48] SPEAKER_01: revenue strategy in terms of the argument that for zero-rated,
[5:53] what the government aims to do is to ensure that zero-rated are
[5:56] only restricted to
[5:58] SPEAKER_01: exported goods and services.
[6:00] SPEAKER_01: While exemption,
[6:00] it was also expected to be limited to some essential goods and
[6:04] services as well.
[6:04] SPEAKER_01: The question then,
[6:06] given that period of time-leveling strategy was supposed to
[6:08] give us guidance as far
[6:10] SPEAKER_01: as tax changes are concerned within a period of three years,
[6:12] sometimes I ask myself whether we set ourselves to failure in
[6:16] terms of are we
[6:17] saying that the 35 goods and services that are listed under the
[6:20] second schedule for
[6:21] SPEAKER_01: 08 would have been removed,
[6:23] SPEAKER_01: all of them,
[6:23] SPEAKER_01: and maybe moved two or three within a period of three years?
[6:26] SPEAKER_01: And I think the answer is no.
[6:28] SPEAKER_01: And that's why for me,
[6:29] I am not surprised when I saw some of these items being
[6:33] reversed by Parliament.
[6:34] SPEAKER_01: Number one,
[6:35] because there was a lot of public outcry as far as removing
[6:38] goods from exempt to
[6:39] SPEAKER_01: standard rated,
[6:40] SPEAKER_01: because obviously it meant that the time was going to go up.
[6:44] SPEAKER_01: And of course,
[6:44] SPEAKER_01: number two,
[6:45] SPEAKER_01: which is also very fundamental,
[6:47] I think is a choice of the goods that we did choose to remove
[6:50] from this category.
[6:51] SPEAKER_01: If,
[6:51] SPEAKER_01: for example,
[6:51] SPEAKER_01: look at the items that are being removed from exempt to 16%,
[6:56] you had things like taxable goods on construction of tourism
[6:58] facilities and
[6:59] SPEAKER_01: recreation parks,
[7:00] SPEAKER_01: things to do with construction and equipping of hospitals,
[7:03] SPEAKER_01: local manufactured passenger vehicles,
[7:05] quite a number of items that you would think by them having
[7:08] been introduced and the
[7:09] SPEAKER_01: exemption,
[7:10] SPEAKER_01: there was a bit of thinking,
[7:11] SPEAKER_01: either in terms of sparring the growth in some of those sectors
[7:14] SPEAKER_01: or other motivation.
[7:15] So the question then would be,
[7:16] is the government then doing away with some of those things?
[7:19] SPEAKER_01: And of course,
[7:19] SPEAKER_01: when you go to the related,
[7:20] SPEAKER_01: quite a number of things there,
[7:22] SPEAKER_01: things like local assembly of mobile phones,
[7:24] SPEAKER_01: which had actually been introduced by the Finance Act of 2022,
[7:28] SPEAKER_01: electric bicycles,
[7:29] SPEAKER_01: solar and steam virtualists,
[7:30] SPEAKER_01: Finance Act of 2023.
[7:32] SPEAKER_01: So two things to note.
[7:34] So in terms of the items that were being moved from exempt to
[7:37] standard rated and
[7:38] SPEAKER_01: from related to exempt,
[7:40] SPEAKER_01: You actually notice some incoherence with the global government policy.
[7:44] Talk of the net zero emissions that the government is aiming to
[7:48] achieve by 2050.
[7:49] SPEAKER_01: So you then ask yourself,
[7:51] by the government removing some of these items in the category
[7:54] they are in,
[7:54] is it that they are contradicting themselves in terms of
[7:57] ensuring that we achieve
[7:58] SPEAKER_01: some of these particular objectives?
[8:00] SPEAKER_01: But the other one,
[8:01] SPEAKER_01: which is fundamental to me as well,
[8:03] is the fact that some of these goods had just been introduced
[8:07] barely 24 months ago.
[8:09] SPEAKER_01: Quite a number of changes,
[8:10] SPEAKER_01: especially for zero retail,
[8:11] including some of the things like electric bicycles had been
[8:15] introduced by the
[8:15] SPEAKER_01: finance act of 2023.
[8:17] SPEAKER_01: Then the question would be,
[8:18] is it that we have done a bit of study and realized that these
[8:21] goods should no
[8:21] SPEAKER_01: longer be under zero retail within such a short period of time?
[8:25] SPEAKER_01: So I think, so for me, I'm not surprised.
[8:27] SPEAKER_01: I think then we needed to retain them.
[8:29] SPEAKER_01: measure it to ensure that we don't affect the health sector,
[8:32] SPEAKER_01: which is some of the areas that these items are affecting,
[8:35] SPEAKER_01: agriculture and also the clean energy agenda.
[8:39] SPEAKER_01: But we hope maybe progressively we will be able to clean up as expected.
[8:43] But I think it should be more informed by policy rather than
[8:46] just committing to
[8:48] some of the pronouncements that have been made in the past
[8:51] without necessarily
[8:52] SPEAKER_01: considering some of the bigger or larger notification of those movements,
[8:56] SPEAKER_01: injurians.
[8:57] SPEAKER_03: Many thanks, Fred Kimothoff.
[8:58] And what he has said is just telling us that if you look at
[9:00] Finance Bill 25,
[9:01] SPEAKER_03: the draft that we saw earlier,
[9:02] SPEAKER_03: and you compare with Finance Acts 25,
[9:05] SPEAKER_03: critically,
[9:05] SPEAKER_03: paragraphs 155 to 164 were dropped.
[9:08] SPEAKER_03: And that means that pharmaceutical inputs and raw materials,
[9:12] SPEAKER_03: transportation of sugar cane from farms to many factories,
[9:15] SPEAKER_03: locally manufactured phones,
[9:17] SPEAKER_03: solar and lithium-ion batteries,
[9:18] SPEAKER_03: electric buses,
[9:20] SPEAKER_03: and tea and coffee packaging material remain VAT zero rated.
[9:24] The implication here is that the manufacturers will be able to
[9:28] claim the input VAT
[9:29] SPEAKER_03: component in their production process.
[9:31] SPEAKER_03: Let me cross over to Jilna with a different perspective on this.
[9:34] SPEAKER_03: Jilna, at the core of this, do we fundamentally have a policy conundrum?
[9:38] SPEAKER_03: Because if you go back to the VAT Act of 2013 and the build-up to it,
[9:43] SPEAKER_03: the reason why we had the conversation around the VAT Act of 2013 was
[9:47] was because we had the very problem we are dealing with right
[9:50] now in terms of too
[9:51] SPEAKER_03: many goods being exempt,
[9:52] SPEAKER_03: too many being zero-rated,
[9:54] SPEAKER_03: and we needed to do cleaner.
[9:55] SPEAKER_03: And we seem to have regressed over the last 12 or so years.
[10:00] And Treasury argues that we have a disingenuous problem in the
[10:03] industry because 30%
[10:03] SPEAKER_03: of all claims in terms of VAT refunds are fraudulent.
[10:09] SPEAKER_03: That is the National Treasury.
[10:10] SPEAKER_03: That is not more.
[10:11] SPEAKER_03: Do we have a policy problem here, Jelena?
[10:14] SPEAKER_02: Yes, I think we do, because we are also not providing any stability.
[10:19] SPEAKER_02: If we look at from 2013 till now,
[10:22] SPEAKER_02: even if you look at the last one,
[10:23] SPEAKER_02: which was up to 2023,
[10:25] SPEAKER_02: that's 10 years.
[10:26] SPEAKER_02: Over the 10 years,
[10:28] SPEAKER_02: you can barely recognize the original VAT Act that we had,
[10:32] SPEAKER_02: which was the 2013.
[10:33] And remember,
[10:34] a lot of thought had been put when that Act was actually done.
[10:39] SPEAKER_02: And over the years, I could see a lot of lobbying or you name it.
[10:43] SPEAKER_02: Every year, there's a change.
[10:45] SPEAKER_02: In fact,
[10:46] some industries have seen their products going from exempt to
[10:49] zero to 16% back to
[10:52] SPEAKER_02: exempt.
[10:53] SPEAKER_02: So it's even making compliance, I think, very difficult for taxpayers.
[10:57] And to an extent,
[10:58] it causes an issue of,
[11:00] I would use the word,
[11:02] erroneous claims.
[11:03] SPEAKER_02: I know you've used the term,
[11:05] the National Treasury has said that there are certain refund
[11:08] claims which are
[11:09] SPEAKER_02: leading to these fraudulent claims.
[11:11] SPEAKER_02: I don't know how much of that I would use the term fraudulent.
[11:14] SPEAKER_02: That's a rather strong term.
[11:16] But could that also be arising partly from the fact that people
[11:20] can also be non-compliant?
[11:22] SPEAKER_02: Remember,
[11:22] people might not even be aware that there is a formula that
[11:25] you're supposed to use
[11:26] SPEAKER_02: when it comes to claiming of VAT,
[11:28] SPEAKER_02: like your 9010 formula.
[11:31] SPEAKER_02: For example,
[11:32] SPEAKER_02: there might be an issue of a genuine case of,
[11:35] SPEAKER_02: I don't know,
[11:35] SPEAKER_02: I've bought from my supplier.
[11:37] SPEAKER_02: I don't know whether he has paid the tax.
[11:39] SPEAKER_02: So that's the challenge I feel taxpayers are having.
[11:42] Although there is the argument of,
[11:44] I think it's called the missing trader,
[11:45] right?
[11:46] That's been the ongoing reason why the National Treasury is
[11:49] saying or CRA is saying
[11:50] SPEAKER_02: that they are these fraudulent claims,
[11:52] SPEAKER_02: I would say.
[11:53] SPEAKER_02: But I don't know if that's the correct term.
[11:55] SPEAKER_02: I cannot verify the claim.
[11:58] SPEAKER_02: And also remember, there is the refund audits that CARE does.
[12:01] SPEAKER_02: I think that should be enough.
[12:02] SPEAKER_02: And the whole fact that now we are moving towards digitalization,
[12:06] I propose that should avoid this whole issue of incorrect
[12:09] claims because now
[12:10] there's visibility on the other side very quickly because of
[12:14] real-time information
[12:15] SPEAKER_02: sharing.
[12:16] SPEAKER_02: that whether there is a fraudulent claim or the likes of such sort.
[12:20] SPEAKER_02: But I think in terms of a VAT cleanup,
[12:22] SPEAKER_02: Julian,
[12:22] I would say it is very much needed because we just need a
[12:26] stable regime for
[12:28] SPEAKER_02: investors.
[12:28] SPEAKER_02: Right now,
[12:29] SPEAKER_02: to tell an investor that what they're planning to supply,
[12:32] SPEAKER_02: one year it's in,
[12:33] SPEAKER_02: one year it's not in exempt,
[12:35] SPEAKER_02: it's moving to zero rate,
[12:36] SPEAKER_02: and it's also causing a bit of uncertainty whether they should come here,
[12:41] SPEAKER_02: invest,
[12:41] SPEAKER_02: because how is one supposed to determine?
[12:43] SPEAKER_02: In fact, we have found...
[12:45] SPEAKER_02: A lot of areas where these errors are occurring in this instance.
[12:49] SPEAKER_02: So I think, yes, we do have a problem and it needs to be.
[12:53] SPEAKER_02: And everything that comes in, remember, we have a national policy.
[12:56] SPEAKER_02: What is the actual agenda of where are we headed?
[12:59] SPEAKER_02: Which sector are we planning to promote?
[13:01] SPEAKER_02: Right now, it's all over the place.
[13:03] SPEAKER_02: If it's looking at...
[13:04] manufacturing then let's work towards which sectors are we
[13:07] planning to grow right
[13:08] now i see no clarity at all where the economy in terms of where
[13:13] are we headed which
[13:14] sector are we promoting which will internally lead to that
[13:17] growth that we are
[13:18] seeking and if that's the case let's incentivize those sectors
[13:22] but i feel right now
[13:23] it's all over the place we're just trying to i think clean up
[13:26] anything even this
[13:27] SPEAKER_02: act was supposed to be a cleanup
[13:29] SPEAKER_02: I don't see having achieved that still, based on what we have just seen.
[13:34] SPEAKER_02: It's, again, more sector-specific and just a few sectors, to be honest.
[13:38] SPEAKER_02: Like you'll see,
[13:39] SPEAKER_02: the mosquito repellent sector has been affected,
[13:42] SPEAKER_02: and the Kenya Defence Forces,
[13:44] SPEAKER_02: for example,
[13:45] SPEAKER_02: those are the ones I think they've tried to target,
[13:47] SPEAKER_02: and the tea sector.
[13:48] SPEAKER_02: So that's my comment there.
[13:50] SPEAKER_02: Thanks, Julian.
[13:51] SPEAKER_03: Thank you, Jilla.
[13:52] And just to highlight that when Jilla talks about the formula
[13:55] to be used for
[13:57] SPEAKER_03: claiming,
[13:58] SPEAKER_03: she is actually referring to Section 17 of the VAT Act.
[14:01] SPEAKER_03: If you go there, you'll see the apportionment formula.
[14:03] SPEAKER_03: And when you had the Tax Laws Amendment Act of 2024,
[14:06] SPEAKER_03: one of the subjects that we had a lot of debate on was the subject of the
[14:10] SPEAKER_03: apportionment formula.
[14:12] SPEAKER_03: Crossing over to Agnes,
[14:13] and as you comment on whether we have a policy predicament here
[14:17] from a VAT
[14:18] SPEAKER_03: architecture standpoint,
[14:19] one of the things which really stood out here was the
[14:22] introduction of Section 66A,
[14:24] empowering the authority with the clawback powers in the event
[14:28] that there's a
[14:29] suspected abuse of the preferential rates of exempt status and
[14:34] zero-rated.
[14:36] SPEAKER_03: What is that?
[14:37] SPEAKER_03: What do you make of it?
[14:38] SPEAKER_03: Is it a step in the right direction?
[14:40] SPEAKER_02: Yes,
[14:40] the Finance Act now provides that any entity or taxpayer who
[14:44] had been given exempt
[14:45] SPEAKER_02: status of a preferential rate and uses it for inconsistency.
[14:50] SPEAKER_02: Transactions,
[14:51] here it has the powers to come back and claim back the VAT at
[14:55] the standard rate,
[14:56] SPEAKER_02: at the time of disposal,
[14:58] SPEAKER_02: at the time when you committed the inconsistent transaction.
[15:01] SPEAKER_02: I think that is a good move and towards the right direction.
[15:05] SPEAKER_02: And especially when now we are talking about 30%,
[15:08] SPEAKER_02: as you mentioned,
[15:09] SPEAKER_02: VAT refund cases being seen to be fraudulent.
[15:12] SPEAKER_02: As much as we cannot verify that information now,
[15:15] SPEAKER_02: we do know there has been a lot of challenges with VAT refunds,
[15:19] SPEAKER_02: both on the side of taxpayers and on the side of here,
[15:21] whereby there has been a long period whereby taxpayers submit
[15:25] all the required
[15:26] SPEAKER_02: documents in their view and still
[15:28] SPEAKER_02: do not get their refunds approved,
[15:30] SPEAKER_02: or even in situations where they get their refunds approved,
[15:33] SPEAKER_02: take a long time to receive the fund.
[15:36] As we are seeing this move or this thought that there are
[15:39] fraudulent application of
[15:41] SPEAKER_02: VAT refunds,
[15:42] SPEAKER_02: it's a good law for us to have in place.
[15:44] SPEAKER_02: that will cater for that so that the people who are using inconsistent or
[15:48] fraudulent transactions to claim for VAT refund do not expose
[15:52] or deter people whose
[15:53] claims are valid and legitimate from having their VAT refund
[15:57] claims approved from
[15:58] SPEAKER_02: the KRA side.
[16:00] SPEAKER_02: And just to mention also on the different changes we are having,
[16:03] SPEAKER_02: and especially the changes moving year on,
[16:05] SPEAKER_02: year out.
[16:06] SPEAKER_02: The rates changing starts with it being standard rated,
[16:09] SPEAKER_02: then comes to zero rated,
[16:11] SPEAKER_02: after some time goes to exempt.
[16:12] SPEAKER_02: I do agree with Jill now that this cost is confusion.
[16:16] to our taxpayers and even worse for investors who would want to
[16:20] come and start up
[16:21] SPEAKER_02: their businesses here in Kenya.
[16:22] SPEAKER_02: For example,
[16:23] SPEAKER_02: I would assume before an investor comes,
[16:25] they'd want to do a strategic plan or a survey of the factors
[16:29] that are going to
[16:30] affect their business and even have a budget or I would say a
[16:33] projection of the
[16:34] profits or by when they would expect for them to break even in
[16:37] their investments
[16:38] SPEAKER_02: and all.
[16:39] SPEAKER_02: So if by the time they are making a decision to come and invest in Kenya,
[16:43] SPEAKER_02: something such as the raw materials on mosquito nets,
[16:47] SPEAKER_02: zero-rated,
[16:48] SPEAKER_02: as it were before this Finance Act of 2025,
[16:52] SPEAKER_02: and then that changes to exempt.
[16:54] It means they will no longer be able to claim the expenses that
[16:57] they incur in
[16:58] SPEAKER_02: production of such mosquito nets.
[17:00] SPEAKER_02: So it's good that we have multiple laws or multiple provisions.
[17:05] SPEAKER_02: And as Jilna was alluding, we can have them sector-based.
[17:08] Can we know that if I invest in this sector,
[17:11] I will be able to expect such a rate.
[17:14] SPEAKER_02: And even if it were a period of time,
[17:15] SPEAKER_02: let's say five years,
[17:17] so that it also enables businesses to be able to operate and go
[17:21] on with what they
[17:22] SPEAKER_02: intended from the onset when they started the investment process.
[17:26] SPEAKER_03: Agnes, allow me to just jump onto the point you mentioned there.
[17:28] SPEAKER_03: On Section 66A,
[17:29] SPEAKER_03: because I take a different view,
[17:30] because there is no guide as to what will be the procedure of
[17:34] the Revenue Authority
[17:34] SPEAKER_03: arriving at the potential abuse by a taxpayer.
[17:37] Don't you see that as a potential leeway for overreach by the
[17:40] authority,
[17:40] Agnes?
[17:41] SPEAKER_02: Yes,
[17:41] SPEAKER_02: Julian,
[17:42] there are possibilities that there could be misuse of that
[17:45] provision to even punish
[17:46] SPEAKER_02: maybe taxpayers who are still doing the right thing.
[17:49] SPEAKER_02: But the good thing is that with such a provision,
[17:51] it also helps to deter many taxpayers who may be using the
[17:55] fraudulent method to
[17:57] SPEAKER_02: claim or to have their goods at lower or preferential VAT rates.
[18:01] And I think maybe what we'd need further on that just to guide
[18:04] the provision of Section 66 is
[18:07] probably guidelines on how the review will be done by the
[18:10] theory or the parameters
[18:12] that will be used to be able to determine what is it that was
[18:15] inconsistent or what
[18:17] is it that was misappropriately used when claiming or
[18:21] conducting your businesses at
[18:23] SPEAKER_02: either zero rated or exempt status.
[18:26] SPEAKER_03: Thank you, Adnes.
[18:27] I'd like us to close our conversation on VAT and just throw an
[18:30] open question to the floor.
[18:31] SPEAKER_03: Either Jill or Bradwick, you can take it.
[18:34] If you look at the MTRS by now,
[18:35] we should have seen the VAT rate coming down.
[18:37] SPEAKER_03: We should have seen the threshold being bumped up.
[18:40] Considering the limited window we now have left for the
[18:42] implementation of the
[18:43] SPEAKER_03: medium-term revenue strategy,
[18:45] do you see these proposals ever materializing or is this
[18:47] something which now we're
[18:48] SPEAKER_03: just talking about?
[18:49] SPEAKER_03: Brad, you can go first.
[18:51] SPEAKER_01: Julian, thanks for that question.
[18:52] SPEAKER_01: You will remember my comment area.
[18:54] I did mention that sometimes I think we set ourselves for
[18:57] failure when we came up
[18:58] with a medium-term level strategy because we do not appear to
[19:01] have little thought
[19:02] SPEAKER_01: through some of the proposals that we put in there.
[19:04] SPEAKER_01: Actually, not proposals because they are already in force.
[19:07] SPEAKER_01: Because when you say,
[19:07] SPEAKER_01: for example,
[19:08] you reduce the corporate income tax rate from 30% to 28% by
[19:12] this and that date,
[19:13] SPEAKER_01: you talk about the threshold,
[19:13] SPEAKER_01: you talk about the VAT also reducing from 16% to 14%.
[19:18] You then wonder whether there was a bit of research that
[19:20] informed those particular
[19:21] SPEAKER_01: pronouncements.
[19:22] Because what we have heard from the cabinet secretary in charge
[19:25] of National
[19:25] SPEAKER_01: Treasury,
[19:25] SPEAKER_01: and I'm sure Julian's you have heard him speak about it as well,
[19:28] is that these proposals were actually there in the finance bill
[19:31] when it was being
[19:32] SPEAKER_01: considered by National Treasury.
[19:34] SPEAKER_01: But when the simulations were done,
[19:35] SPEAKER_01: it was noted that the impact,
[19:37] SPEAKER_01: the revenue impact was going to be very major.
[19:40] There was then the thinking that we should shelf the idea of
[19:43] using the VAT rate,
[19:44] for example.
[19:45] SPEAKER_01: Also,
[19:45] SPEAKER_01: the view of the Piazuan birds,
[19:47] SPEAKER_01: I think there has been a conversation that they should be reviewed.
[19:50] The conversation was that it was going to have a very huge
[19:52] impact on the revenue.
[19:54] You then wonder whether that impact had not been foreseen when
[19:57] the medium-term
[19:58] SPEAKER_01: Lebanon strategy was being drafted.
[20:00] SPEAKER_01: But having said that,
[20:01] I think the reason we have been given by the SEERS is that
[20:04] there is a lot of
[20:05] measures that have been proposed or that are being implemented
[20:09] by the Lebanon
[20:09] SPEAKER_01: Authority.
[20:10] So I think what the government is doing is a wait-and-see
[20:12] approach in terms of
[20:14] whether those administrative measures that have been listened
[20:17] and been introduced,
[20:18] SPEAKER_01: including things like E-teams,
[20:19] will bear the fruit that they're expected to bear so that then
[20:22] there's a bit of
[20:23] SPEAKER_01: upsurge of the revenue.
[20:24] SPEAKER_01: And as such,
[20:25] SPEAKER_01: when you eventually reduce the VAT rate,
[20:27] SPEAKER_01: for example,
[20:28] there is going to be a compensation of some sort so that then
[20:31] you don't reduce the
[20:32] VAT rate and yet also the administrative measures have not yet
[20:36] yielded the fruits
[20:37] SPEAKER_01: that they were supposed to yield.
[20:38] SPEAKER_01: So I think that is what has been told to us.
[20:40] SPEAKER_01: But having said that,
[20:41] I do think that it is not good for us as a country to pronounce
[20:45] quite a number of
[20:46] significant things that we intended to do as far as our tax
[20:49] policy is concerned.
[20:51] Then we start back checking and giving other reasons as to why
[20:53] we are not able to
[20:54] SPEAKER_01: implement them.
[20:55] SPEAKER_01: We are now left with one year.
[20:57] We just hope that we can see most of the changes coming into
[20:59] effect next year.
[21:01] I truly believe that some of them will come into effect,
[21:04] although maybe not of them.
[21:06] SPEAKER_01: Also considering that we'll be going back to the bottom by 2027,
[21:09] so it's likely that some of those reduction of rates will come
[21:13] in handy in terms of
[21:14] SPEAKER_01: convincing the common man.
[21:16] SPEAKER_03: Thank you, Fred, for your thoughts on VAT.
[21:18] SPEAKER_03: And I'd like us to close our discussion on VAT at that point.
[21:20] SPEAKER_03: There's a lot more on changes to the value of the Tax Act piece.
[21:24] You can interact with the Finance Act 5 and see what is exactly
[21:28] provided best.
[21:28] SPEAKER_03: Switching gears to the Tax Procedures Act.
[21:31] SPEAKER_03: Vilna, I'm sure we were all excited to see two provisions being dropped.
[21:36] One was granting the Revenue Authority access to Fed Secrets
[21:39] and personal data.
[21:41] Another one was on issuance of agency notices despite appeals
[21:44] by taxpayers.
[21:45] SPEAKER_03: They were dropped,
[21:46] but just speak to us in terms of the significance of them being
[21:49] dropped from the
[21:49] SPEAKER_03: Finance Act.
[21:50] SPEAKER_02: I think the issue of trade secrets and personal data,
[21:54] there was a lot of outcry around the same because some of the
[21:57] industries have a lot
[21:58] SPEAKER_02: of sensitive data.
[22:00] So we were not sure what was the reason of the KRA also having
[22:04] such personal information.
[22:06] SPEAKER_02: how the data would be obviously stored or captured.
[22:09] SPEAKER_02: And then what was the use of that data in the first place?
[22:12] SPEAKER_02: Because it's so sensitive.
[22:13] SPEAKER_02: And then also trade secrets.
[22:15] We don't know who's going to be handling that with the utmost
[22:18] care that it needs.
[22:19] So I think that has been one of the biggest wins,
[22:22] I would say,
[22:22] at least in the act.
[22:24] SPEAKER_02: that we have seen and also for the agency notices,
[22:26] it would have become a bit of you have to pay to play the game
[22:30] type of a situation
[22:31] if we had these agency notices issue there because enforcements
[22:36] and the likes would
[22:37] SPEAKER_02: be quite rampant as we can see.
[22:39] So the fact that now at least I can appeal without that stress
[22:43] of having to put
[22:44] SPEAKER_02: money aside because some of these assessments,
[22:46] SPEAKER_02: as we have seen Julian's in the past,
[22:49] SPEAKER_02: I'm not even making sense.
[22:50] SPEAKER_02: It's not even the turnover of a company.
[22:52] And what we are seeing lately is some really rampant
[22:56] assessments that are being given by Carey.
[22:58] SPEAKER_02: So it would go a long way for a taxpayer.
[23:01] At least they get a chance to fight the case to whichever level
[23:05] that they want to
[23:07] SPEAKER_02: and dispute for a taxpayer.
[23:08] SPEAKER_02: It's important that they get a chance to fight their ground.
[23:11] SPEAKER_02: I know on the other side,
[23:13] SPEAKER_02: it was that because people don't want to pay,
[23:15] SPEAKER_02: they'll continue fighting us.
[23:17] SPEAKER_02: It could be 50-50,
[23:18] SPEAKER_02: as we have seen in terms of the cases at the moment,
[23:21] SPEAKER_02: but 50,
[23:21] SPEAKER_02: maybe one by carry,
[23:23] SPEAKER_02: 50 by the taxpayer.
[23:24] But a taxpayer still has to have a fair right to go and fight
[23:30] in any assessment.
[23:31] So I think by having this agency notices issue drop,
[23:34] it will help the taxpayer for sure.
[23:37] Although it's not in line,
[23:38] other countries in our neighboring countries are doing it.
[23:40] SPEAKER_02: I don't know,
[23:40] SPEAKER_02: maybe it's only a matter of time,
[23:42] SPEAKER_02: maybe till we play catch up,
[23:43] SPEAKER_02: but at least for now,
[23:44] SPEAKER_02: it's a big win.
[23:45] SPEAKER_02: Thank you.
[23:47] SPEAKER_03: And that was my quick ride,
[23:48] SPEAKER_03: Jilna,
[23:48] SPEAKER_03: because if you look recently,
[23:49] SPEAKER_03: Uganda just introduced the 30% mandatory deposit going for an appeal.
[23:53] And there's a sense in which across the region that perhaps an
[23:56] authority to table
[23:57] SPEAKER_03: this argument,
[23:58] there is a prevalence of what they call frivolous appeals and
[24:02] petitions by
[24:03] SPEAKER_03: taxpayers.
[24:03] SPEAKER_03: Does that argument fly for you, Jilna?
[24:05] No,
[24:06] it doesn't because I feel it's more the frivolous assessments,
[24:09] I would call it.
[24:10] SPEAKER_02: If you look at it from experience,
[24:13] SPEAKER_02: we found even an assessment being more than the turnover of a company.
[24:17] SPEAKER_02: Like, how does that work?
[24:18] SPEAKER_02: How can a tax assessment be higher than even a turnover of a company?
[24:22] SPEAKER_02: It just doesn't make sense.
[24:24] SPEAKER_02: So to me, it could go both ways.
[24:26] Yes,
[24:26] where there's a genuine case of serious issues by the taxpayer,
[24:30] then fair enough.
[24:31] SPEAKER_02: But how much of it,
[24:33] SPEAKER_02: because of the fact that now we are on e-teams and everything,
[24:35] SPEAKER_02: and then this whole digitalization,
[24:37] SPEAKER_02: how much can a taxpayer also be not paying taxes?
[24:40] SPEAKER_02: There's so much more visibility, which now the revenue authority has.
[24:44] SPEAKER_02: So in my view,
[24:45] SPEAKER_02: I don't think that statement would be accurate,
[24:48] SPEAKER_02: as I would say,
[24:49] SPEAKER_02: from the other side.
[24:51] SPEAKER_03: Many thanks for your thoughts on those two provisions,
[24:53] SPEAKER_03: which delightfully were dropped from Finance Act 25.
[24:56] SPEAKER_03: Admes,
[24:56] SPEAKER_03: from my reading,
[24:58] Section 47.1 seems to have been amended to permit the set-off
[25:02] of refunds against
[25:03] SPEAKER_03: import VATQ.
[25:05] Help us understand why this is a significant development and
[25:09] what it means for taxpayers.
[25:11] SPEAKER_02: Yes,
[25:12] SPEAKER_02: the TPA,
[25:13] the Tax Procedures Act has provided that you can now offset
[25:17] your taxes instead of
[25:18] claiming your VAT on imports or offsetting it against only your
[25:22] output VAT.
[25:23] SPEAKER_02: You can also claim to offset it against other taxes.
[25:27] SPEAKER_02: This is a good move and especially for companies that have
[25:30] huge VAT credits arising from import of purchases because it
[25:34] then would enable them
[25:36] to manage their cash flows because in an instance whereby there
[25:40] is a huge import,
[25:41] SPEAKER_02: for example,
[25:41] SPEAKER_02: companies that would require to have a huge setup for them to start their
[25:46] SPEAKER_02: businesses,
[25:47] SPEAKER_02: giving,
[25:47] SPEAKER_02: in this case,
[25:48] SPEAKER_02: maybe a manufacturing
[25:50] It means they would have maybe a very huge input to make and
[25:53] there's that have a
[25:54] huge VAT input credit and now allowing them to offset other
[25:58] taxes against it would
[25:59] help them manage cash flow and probably be able to focus on
[26:03] other operations of the
[26:04] SPEAKER_02: business on the onset.
[26:07] The good thing about this provision is that most of the time
[26:10] input or verification of
[26:12] VAT credits that arise from imports most of the time is usually
[26:16] a bit cleaner
[26:17] SPEAKER_02: compared to other input VAT credits that may arise from local purchases.
[26:22] So I feel like it's a good move that the KRA has decided or the
[26:25] law has decided to
[26:27] bring in this provision because it's going to support many
[26:30] businesses and help them
[26:32] SPEAKER_02: manage their cash flows.
[26:33] SPEAKER_02: And also it's a provision that does not come with huge savings.
[26:37] SPEAKER_02: and especially procedural,
[26:38] SPEAKER_02: I would say,
[26:38] verification processes just to determine whether the input VAT
[26:42] being claimed is
[26:43] SPEAKER_02: legitimate or not.
[26:45] SPEAKER_03: Certainly,
[26:45] that was quite a breath of fresh air being seen coming through
[26:48] the Finance Act of
[26:49] SPEAKER_03: 2025.
[26:49] SPEAKER_03: Fred,
[26:51] we have seen two instances where the law is being amended
[26:54] clearly provide that the
[26:56] National Treasury has a six-month window within which to
[26:58] provide regulations for
[27:01] SPEAKER_03: one,
[27:01] SPEAKER_03: advanced pricing agreements,
[27:03] SPEAKER_03: and two,
[27:04] SPEAKER_03: significant economic presence tax,
[27:05] help us understand why we are having this six months being
[27:09] actually embedded in the
[27:11] SPEAKER_03: law.
[27:12] SPEAKER_01: Good well, Julians.
[27:13] And maybe if you allow me just to add a few comments on what
[27:15] Agnes has commented on.
[27:17] You would recall that the Tax Amendment Act of 2024 did amend
[27:22] Section 47 and
[27:23] SPEAKER_01: included something called input tax.
[27:25] SPEAKER_01: So what is happening, Julians?
[27:26] You have players in the sector who actually do a lot of import
[27:30] and they also do a lot of export.
[27:31] SPEAKER_01: So they end up having a lot of decrees,
[27:34] SPEAKER_01: which they are then,
[27:35] because of the constraints from the government in terms of
[27:37] giving them the actual
[27:38] SPEAKER_01: cash,
[27:39] SPEAKER_01: The refunds remain with the KRA for a long time,
[27:42] SPEAKER_01: because I hear like for VAT,
[27:43] SPEAKER_01: I think the maximum amount you can get per month,
[27:45] SPEAKER_01: I don't know whether I can replace the taxpayer,
[27:47] SPEAKER_01: is like $30 million.
[27:48] You can imagine if you have a billion in form of VAT refunds,
[27:51] or say even $500 million.
[27:53] SPEAKER_01: So it then means that you've got to wait for a very long time.
[27:55] SPEAKER_01: And remember, this number is piling up every year.
[27:58] The options that are left in leading Section 47 is that you can
[28:02] only then utilize
[28:03] SPEAKER_01: that in terms of offsetting against other taxes.
[28:06] SPEAKER_01: The ones that the KRA had acknowledged earlier,
[28:09] SPEAKER_01: Majority the payers you earn, your domestic VAT.
[28:12] SPEAKER_01: Another thing like withdrawing tax and withdrawing VAT.
[28:15] But VAT on goods imported was specifically not being allowed in
[28:19] terms of the offset.
[28:20] So you have companies that even when they try to utilize the
[28:24] offset option,
[28:25] SPEAKER_01: Because of the linear taxes that they are paying on this other side,
[28:28] SPEAKER_01: they still ended up having a lot of money stuck with the government.
[28:32] And that's the reasoning then to say,
[28:33] can we also bring VAT on imported goods?
[28:37] SPEAKER_01: So then these companies that are heavily on imported,
[28:39] SPEAKER_01: for example,
[28:40] SPEAKER_01: raw materials,
[28:41] SPEAKER_01: and they're carrying huge VAT,
[28:42] SPEAKER_01: they don't end up paying VAT on raw materials when they import,
[28:46] SPEAKER_01: yet the government has a lot of cash that they are still holding.
[28:49] So when it was introduced last year,
[28:51] there was a technical hitch in terms of what input tax is.
[28:55] SPEAKER_01: And as a result, the government never implemented it in the system.
[28:58] SPEAKER_01: But we hope now with the credit that has been provided as Act 47,
[29:02] the government will enable taxpayers to be able to utilize
[29:05] their refund that is
[29:06] SPEAKER_01: already approved against VAT on imported goods.
[29:09] SPEAKER_01: I hope we get there.
[29:11] SPEAKER_01: Now,
[29:11] SPEAKER_01: moving on,
[29:12] SPEAKER_01: in terms of the six months,
[29:14] SPEAKER_01: something is almost laughable here,
[29:15] SPEAKER_01: Julian,
[29:16] because you realize that we are saying that we will give the
[29:20] government six months
[29:22] SPEAKER_01: to provide regulations for SEPT or Significant Economic Presence Tax.
[29:26] SPEAKER_01: From the time Significant Economic Presence Tax was actually introduced,
[29:29] SPEAKER_01: which was on 27th of December of 2024,
[29:31] SPEAKER_01: which then technically means that as we speak,
[29:34] SPEAKER_01: we should have those regulations.
[29:35] They're actually time bad already because we are only six
[29:38] months after the law came into force.
[29:41] So then that means that the six months,
[29:42] maybe there could have been a drafting issue.
[29:45] Maybe it started counting from 1st of July,
[29:47] so that we're going up to 31st of December.
[29:49] SPEAKER_01: But having said that from an advanced pricing agreement,
[29:52] I think it's a welcome one because then it does give the
[29:55] government the time to
[29:57] SPEAKER_01: ensure that they look at those regulations,
[29:58] SPEAKER_01: they subject them to public participation.
[30:00] SPEAKER_01: And when they come into force, then everyone accepts them.
[30:04] SPEAKER_01: The only question, Julian, is whether we should have pegged
[30:08] the effective date of these particular registrations to the
[30:12] time the regulations
[30:13] SPEAKER_01: come into force.
[30:14] SPEAKER_01: Because it is absurd that you implement a law,
[30:17] SPEAKER_01: it is enforced already,
[30:18] SPEAKER_01: but the regulations will be published in six months' time.
[30:21] SPEAKER_01: So what happens in the intervening period?
[30:23] SPEAKER_01: Does it mean then...
[30:24] SPEAKER_01: that you can fail to comply and move scot-free.
[30:26] SPEAKER_01: So there are those questions that someone might ask.
[30:29] But I think it would be good practice to peg the effective date
[30:32] of these laws that
[30:33] SPEAKER_01: require regulations to the date that the regulations are also published.
[30:37] SPEAKER_01: But the other thing that you also notice,
[30:39] SPEAKER_01: Julian,
[30:39] SPEAKER_01: is that,
[30:40] SPEAKER_01: for example,
[30:41] SPEAKER_01: for SEPT or Significant Economic Process Tax,
[30:43] SPEAKER_01: the language that is used under Section 12e is that of mail,
[30:47] SPEAKER_01: the commissioner or the cabinet secretary may publish.
[30:50] which then means that there could be a case for the government
[30:53] to argue that even
[30:54] SPEAKER_01: if the regulations were not in place,
[30:56] SPEAKER_01: we expected you to actually comply with SEPT,
[30:59] SPEAKER_01: which obviously then would bring in some sort of disputes.
[31:02] But as I said,
[31:03] I think it's good practice we review these effective deeds,
[31:05] Julian's.
[31:06] SPEAKER_03: You raise a very good point there,
[31:08] SPEAKER_03: Fred,
[31:08] because one of my submissions in the previous public
[31:10] participation exercise to the
[31:11] Finance and Planning Committee was that the effective dates of
[31:14] any provision should
[31:15] be pegged on the visibility of the regulations guiding the
[31:19] implementation.
[31:21] SPEAKER_03: If you remember the experience you had with E-TEAMS,
[31:23] It was absolutely chaotic because there were no regulations and
[31:26] here we are still
[31:27] SPEAKER_03: being expected to comply.
[31:28] SPEAKER_03: But it hasn't been all hunky-dory on the Tax Procedures Act.
[31:31] SPEAKER_03: Jilna,
[31:31] speak to us about the increase in the number of days for KRA to
[31:34] ascertain a tax
[31:35] SPEAKER_03: refund from 90 to 128.
[31:36] SPEAKER_03: Jilna Shah.
[31:39] SPEAKER_02: So for refund applications,
[31:41] SPEAKER_02: the CARE where they have,
[31:42] SPEAKER_02: say,
[31:42] SPEAKER_02: for example,
[31:43] SPEAKER_02: an audit ongoing,
[31:46] SPEAKER_02: then the refund processing window has moved from 120 days to 180 days.
[31:51] SPEAKER_02: And where there is no audit,
[31:54] SPEAKER_02: say they opted not to audit,
[31:56] then the refund permissionless decision has moved from within
[31:59] 90 days to 120 days.
[32:01] SPEAKER_02: So it's actually cushioning.
[32:03] commissioner the time to ascertain their refunds basically
[32:07] that's so obviously it's
[32:08] a hit on the taxpayer because the cash flow gets affected by
[32:12] the additional for
[32:13] example 60 days where you're under an audit or another 30 days
[32:17] if you're not under
[32:19] an audit so it's just increasing the cash flow burden that we
[32:23] already have in the
[32:24] SPEAKER_02: system
[32:25] SPEAKER_03: Yes, we are likely to see some hits there on cash flows.
[32:27] SPEAKER_03: We hope it won't be too bad.
[32:29] An open question now as we close our conversation on the tax
[32:31] procedures is on section 77.
[32:34] And I think the question of computing the time for filing an
[32:37] objection and whether
[32:38] SPEAKER_03: we are including weekends and public holidays or not.
[32:41] SPEAKER_03: This was a matter of intense debate.
[32:43] SPEAKER_03: Agnes, Fred, let me start with you.
[32:45] SPEAKER_03: What are your thoughts on what you have finally seen in the act?
[32:48] SPEAKER_03: And why is it important, by the way?
[32:50] SPEAKER_02: So the provision that allowed that weekends and holidays,
[32:53] SPEAKER_02: even public holidays,
[32:54] SPEAKER_02: be part of the counting of days when we talk.
[32:57] SPEAKER_02: And in this,
[32:57] SPEAKER_02: the most recent one that Jilna has talked about,
[33:00] SPEAKER_02: the 120 days that the carry has been granted to review applications.
[33:05] I'd say,
[33:05] what about the holidays that came in between that were not
[33:08] expected?
[33:09] SPEAKER_02: I remember either this year or last year,
[33:11] SPEAKER_02: we had a tree planting day that was not initially in the calendar.
[33:13] SPEAKER_02: And also...
[33:15] There are a number of clients that one field deadline in terms
[33:18] of applying or
[33:19] SPEAKER_02: submitting the objections.
[33:21] SPEAKER_02: And even from the KRA side,
[33:22] the KRA giving status of their review or the KRA giving their
[33:26] opinion on the
[33:27] SPEAKER_02: objection that a taxpayer has lodged.
[33:30] So excluding or having these extended,
[33:33] for example,
[33:33] in this case for KRAs,
[33:36] SPEAKER_02: chance to 120 days from the 90 days,
[33:38] I think it's better to have it this way as opposed to have a
[33:42] shorter period,
[33:43] SPEAKER_02: 90 days like in the previous case,
[33:45] SPEAKER_02: and exclude the weekends.
[33:46] And mostly because of the ambiguity that comes with any changes
[33:50] that may appear
[33:51] SPEAKER_02: that were not expected as holidays,
[33:54] SPEAKER_02: especially holidays,
[33:54] SPEAKER_02: because weekends are constant.
[33:56] SPEAKER_02: In my opinion,
[33:57] it's better than we have an extended period that covers both
[34:01] weekends and weekdays
[34:02] SPEAKER_02: so that
[34:03] We are talking of calendar days as opposed to working days
[34:07] because the working days
[34:08] was bringing a lot of confusion both to the taxpayer side and
[34:12] to the care side.
[34:13] And in instances where we were dealing with high assessment and
[34:17] the law provides
[34:18] that you will be deemed to have accepted an assessment if you
[34:21] do not lodge an
[34:21] SPEAKER_02: objection within the set limit or the set number of days.
[34:25] SPEAKER_02: For some taxpayers, it was detrimental.
[34:27] So excluding the weekends is a better provision for both care
[34:32] and for taxpayers.
[34:34] SPEAKER_03: Certainly eases the administration burden there.
[34:36] SPEAKER_03: Thank you so much.
[34:36] SPEAKER_03: Fred, did you want to come in to that point?
[34:39] SPEAKER_01: Yes, I could do that.
[34:40] SPEAKER_01: And I agree with Agnes.
[34:42] SPEAKER_01: You will recall that,
[34:43] SPEAKER_01: and especially this one of excluding weekend that Pam recorded,
[34:46] SPEAKER_01: it mostly applies to objections and appeals.
[34:49] SPEAKER_01: So before 27th of December of 2024, we used to count the number of days.
[34:53] SPEAKER_01: For example, for objection, there used to be 30 days.
[34:55] SPEAKER_01: We used to count the current days.
[34:57] So it used to disadvantage taxpayers,
[34:58] especially when you have very long public holidays.
[35:01] SPEAKER_01: I remember before this, you could be breaking for Christmas or 24th.
[35:05] SPEAKER_01: And that is when actually most of the assessments used to come.
[35:07] SPEAKER_01: So by the time you're having your Christmas holiday,
[35:09] you're already worried about the number of days that are
[35:12] already moving with a bit
[35:13] SPEAKER_01: of speed.
[35:14] SPEAKER_01: So then to that extent,
[35:15] there's a leap to taxpayers because then you can be comfortable
[35:18] that you can enjoy
[35:19] SPEAKER_01: your holiday and come back and deal with your objection or the appeals,
[35:22] SPEAKER_01: which is a good thing.
[35:23] SPEAKER_01: And of course, Julian's also case have become a bit more complicated.
[35:27] SPEAKER_01: So it requires a bit of more time to just put things together.
[35:30] And the other thing that you must actually notice even from the
[35:32] judgments of the
[35:33] SPEAKER_01: TAT,
[35:34] increasingly we are seeing a lot of taxpayers losing their
[35:36] cases because of what we
[35:38] SPEAKER_01: call supporting documentation.
[35:40] Excluding weekends and public holidays then will allow the
[35:42] taxpayers to put
[35:43] together the documentation that is required to support the
[35:46] appeal or the objection.
[35:47] SPEAKER_01: But having said that,
[35:48] SPEAKER_01: Julian,
[35:48] I think it's also important that we look at this more and more
[35:52] critically.
[35:53] It's probably fashionable to defend that weekends and public
[35:56] holidays should be excluded.
[35:57] SPEAKER_01: But I think it is also good to ask ourselves
[36:00] whether there are some other negative impacts that this one may
[36:03] come with.
[36:03] SPEAKER_01: And one of them that I see,
[36:05] we have just come from Jilina telling us the implication of
[36:09] increasing the number
[36:10] SPEAKER_01: of days from 90 to 120,
[36:12] SPEAKER_01: from 120 to 180 for refunds,
[36:15] SPEAKER_01: which I think,
[36:15] SPEAKER_01: if I hear us correctly,
[36:17] what you're basically saying is that it may have a negative
[36:19] impact on taxpayers
[36:20] SPEAKER_01: because it may constrain the cash flows.
[36:23] Now,
[36:24] the question we need to ask ourselves is why are we
[36:27] increasingly looking at these days?
[36:28] SPEAKER_01: Because from a taxman perspective,
[36:31] SPEAKER_01: the taxman will then say,
[36:32] SPEAKER_01: I want to increase the numbers from 90 to 120 days.
[36:35] SPEAKER_01: In any event,
[36:36] you also have been given more days as far as the objection is
[36:39] concerned from 30
[36:41] SPEAKER_01: days and you have excluded weekends and time recall days.
[36:44] SPEAKER_01: So as a result...
[36:45] SPEAKER_01: We are likely then to see timelines just being reviewed negatively to the
[36:49] SPEAKER_01: taxpayers,
[36:49] SPEAKER_01: negatively to the 11-year authority as well.
[36:51] So in my view,
[36:52] where the timelines are working,
[36:54] I don't think we should touch them.
[36:55] SPEAKER_01: The other thing that you'll actually notice,
[36:57] SPEAKER_01: Jurians,
[36:57] SPEAKER_01: and if you look at history,
[36:58] SPEAKER_01: you'll notice that some public colleges just come up.
[37:01] SPEAKER_01: You know, there's a tree planting there.
[37:03] So the question then is whether we'll have someone who is
[37:06] behind configuration of
[37:07] SPEAKER_01: ITACs updating this.
[37:10] So then you don't add up with penalties and interest that are
[37:13] loners just because
[37:14] someone did not update a public holiday that was declared
[37:17] because the practitioners
[37:18] in the call will tell you getting penalties and interest
[37:21] removed from the system
[37:23] SPEAKER_01: when they have already been imposed.
[37:25] It's actually probably harder than the sacrifice you would pay
[37:29] for just spending an
[37:30] SPEAKER_01: extra day to prepare that objection or prepare that particular appeal.
[37:33] So I think the question on time,
[37:35] we have to think about it more comprehensively.
[37:38] SPEAKER_01: And in my view,
[37:38] SPEAKER_01: when days are working,
[37:39] I think creators retain them the way they are without
[37:42] necessarily looking at them
[37:42] SPEAKER_01: again.
[37:43] Fred,
[37:44] we can have this debate,
[37:45] and we've had it in the past until we finish.
[37:47] SPEAKER_03: Let's close it at that.
[37:48] SPEAKER_03: Let me take two questions which I'm seeing online.
[37:50] SPEAKER_03: The first one comes from Robert Ferreiro.
[37:52] SPEAKER_03: This issue of the 2.5% withholding tax on freight income.
[37:56] How will KRA assess and collect the 2.5% withholding tax on
[37:59] freight income?
[38:00] SPEAKER_03: And there's another question here being asked on the Tax Procedures Act.
[38:03] SPEAKER_03: Shouldn't we have seen the amnesty being extended?
[38:06] SPEAKER_03: That's a funny one.
[38:07] SPEAKER_03: Maybe we can start with that one.
[38:08] SPEAKER_03: Jill, should we have seen the tax amnesty being extended?
[38:11] SPEAKER_02: I think we need to see how much has been collected to justify a case,
[38:15] SPEAKER_02: hopefully in the next bill.
[38:17] SPEAKER_02: But as it stands,
[38:18] SPEAKER_02: I saw that there was a lot of last-minute rush,
[38:20] SPEAKER_02: even from the KRA,
[38:21] to close all assessments so that taxpayers could take advantage
[38:26] of the amnesty.
[38:27] SPEAKER_02: But at the moment,
[38:29] SPEAKER_02: the sentiments or should we say the comments that we received was,
[38:32] SPEAKER_02: why should we continue?
[38:33] SPEAKER_02: Because we will never otherwise close at any point.
[38:37] SPEAKER_02: We will always end up giving amnesties.
[38:40] SPEAKER_02: So I think in that sense, we also need to comply as taxpayers.
[38:44] So just to ensure we don't always get cushioned by the fact
[38:47] that there's always an amnesty.
[38:49] SPEAKER_02: I did also pray and we also pushed for it, but it didn't come true.
[38:54] Maybe actually the question I had in mind around that was that
[38:56] now that we had ITAX
[38:57] SPEAKER_03: collapsing on the last day,
[38:59] SPEAKER_03: we're having the amnesty being extended equally to July 5th.
[39:02] SPEAKER_03: If you look at ITAX, it looks like a different story.
[39:04] SPEAKER_03: But anyway,
[39:05] SPEAKER_03: Agnes and Frederick,
[39:06] who can help me on this issue of the 2.5 withholding tax on
[39:08] freight income?
[39:09] SPEAKER_01: I'm happy to do this.
[39:11] SPEAKER_03: Go ahead, Frederick.
[39:12] So if you look at freight tax currently or rather before the
[39:15] Finance Act of 2025,
[39:17] SPEAKER_01: it was being administered by way of self-assessment.
[39:21] So more specifically,
[39:22] it was imposed under Section 9.1 of the Income Tax Act.
[39:25] SPEAKER_01: So what used to happen is that the agents of the shipping lines
[39:30] SPEAKER_01: were the ones that were collecting the data,
[39:31] SPEAKER_01: computing the freight tax,
[39:33] SPEAKER_01: and limiting it to the government by the 20th day of the following month,
[39:36] SPEAKER_01: which was a very straightforward way of looking at it.
[39:39] If you look at the number of agents we actually have for the
[39:41] shipping lanes,
[39:42] SPEAKER_01: I think they allowed 47 when I last checked.
[39:45] SPEAKER_01: So then it was easy for them to do that,
[39:47] SPEAKER_01: and I think that is where Lombard is coming from,
[39:48] SPEAKER_01: because then we are saying,
[39:50] What the Finance Act basically has done is to remove this
[39:53] obligation from the
[39:54] SPEAKER_01: agent,
[39:55] SPEAKER_01: has taken it to a withholding tax mechanism,
[39:58] SPEAKER_01: where we are now seeing that the person paying the shipping line,
[40:01] SPEAKER_01: which is an resident entity,
[40:03] SPEAKER_01: the freight tax,
[40:04] is the one who is supposed to then compute the freight tax and
[40:07] limit it by way of
[40:08] SPEAKER_01: withholding tax every five working days.
[40:10] SPEAKER_01: And if you look at this,
[40:11] the number of people that were expected to limit these
[40:13] particular taxes are
[40:14] SPEAKER_01: unimaginable.
[40:15] SPEAKER_01: I would imagine they are in thousands.
[40:18] SPEAKER_01: So the question then,
[40:19] SPEAKER_01: would be,
[40:20] is it easier to administer it when it was being done by the
[40:23] agents by way of
[40:24] SPEAKER_01: self-assessment?
[40:25] Or it will be easier now that it will be done by a thousand and
[40:29] one payers to the
[40:30] SPEAKER_01: shipping lines?
[40:31] SPEAKER_01: And Julian, we did engage the finance committee on this particular one.
[40:34] SPEAKER_01: And where we're coming from is that we thought that moving this from a
[40:38] self-assessment regime to a withholding tax regime would
[40:41] actually most likely lead
[40:43] SPEAKER_01: to leakage of tax.
[40:45] SPEAKER_01: But then I don't think the proposal was actually taken.
[40:47] SPEAKER_01: That's why we are having this conversation.
[40:49] SPEAKER_01: But we hope to see maybe the impact as we go into the new year.
[40:53] But having said that,
[40:54] it's also good to mention where the government is coming from.
[40:56] SPEAKER_01: If you look at Section 9.1,
[40:58] you'll actually notice that there's some ambiguity as far as
[41:01] this tax is concerned.
[41:02] The loan does not put the obligation on the agent's query
[41:06] because even when you
[41:07] SPEAKER_01: look at Section 47 of the Income Tax Act,
[41:09] there would have been an argument that the agent is actually
[41:11] not obligated.
[41:13] And the other thing actually you'll also notice is that this
[41:15] particular piece of
[41:16] SPEAKER_01: registration did not have a deadline.
[41:18] So there was no,
[41:19] like,
[41:19] you're supposed to limit this freight trucks on a certain day.
[41:22] SPEAKER_01: So I think based on those two major things,
[41:24] the government thought it is good to introduce something that
[41:27] at least will impose
[41:29] SPEAKER_01: the obligation on a certain individual.
[41:31] SPEAKER_01: And also,
[41:31] SPEAKER_01: most importantly,
[41:32] SPEAKER_01: put a denture into it,
[41:33] in which case then they moved from a self-assessment to
[41:36] withholding tax regime.
[41:37] SPEAKER_01: But if you ask me,
[41:38] maybe what should have been done is to put a bit of muscle to
[41:41] the commissioner of
[41:42] SPEAKER_01: domestic taxes,
[41:43] SPEAKER_01: for them to be able to enforce the self-assessment regime,
[41:46] SPEAKER_01: which I think was already working perfectly.
[41:50] SPEAKER_03: Thanks, Fred.
[41:50] I also struggled with it because it looked like the government
[41:53] was very keen on
[41:53] SPEAKER_03: getting some agencies to play the collection role.
[41:56] SPEAKER_03: But again,
[41:57] the cost of administration versus the yield that will be
[41:59] realized is something we
[42:00] SPEAKER_03: wait to see.
[42:01] SPEAKER_03: Time is far spent.
[42:02] We need to switch gears to income tax and possibly excise if
[42:04] we'll have a minute.
[42:06] SPEAKER_03: Agnes,
[42:06] SPEAKER_03: help us understand advanced pricing agreements,
[42:09] SPEAKER_03: one of my key highlights in Finance Act 25.
[42:12] SPEAKER_02: Thank you, Julian.
[42:13] SPEAKER_02: The advanced financing agreement will ideally simplify transfer pricing
[42:18] SPEAKER_02: documentations with the KRE.
[42:19] We've had a series whereby companies or entities have transfer
[42:23] pricing documents or
[42:24] SPEAKER_02: transfer pricing policies in place.
[42:26] SPEAKER_02: And to give as an example, we'd have...
[42:29] SPEAKER_02: maybe a margin,
[42:30] SPEAKER_02: a profit margin,
[42:31] SPEAKER_02: say,
[42:31] SPEAKER_02: of 5%,
[42:32] SPEAKER_02: and the company would be operating the same,
[42:35] SPEAKER_02: say,
[42:35] SPEAKER_02: for a number of years.
[42:36] SPEAKER_02: And the KRA will then come,
[42:38] SPEAKER_02: and after they do the assessment,
[42:40] SPEAKER_02: they decide that they need to revise such a margin upward,
[42:43] SPEAKER_02: say,
[42:43] SPEAKER_02: to 7.5%.
[42:45] SPEAKER_02: The question has always been from the taxpayer side,
[42:48] SPEAKER_02: since they do have a transfer pricing document,
[42:50] And I believe it followed the strict measure of the preparation
[42:54] of a proper
[42:55] SPEAKER_02: transfer present documents.
[42:56] SPEAKER_02: But the KRA has a different view.
[42:58] SPEAKER_02: And of course,
[42:58] benchmarking analysis may differ from time to time based on the
[43:03] data that has been
[43:04] SPEAKER_02: used.
[43:05] So you'd find out institutions whereby as much as a taxpayer
[43:08] has not willingly
[43:10] SPEAKER_02: avoided tax,
[43:10] SPEAKER_02: they'd find themselves with...
[43:12] SPEAKER_02: tax assessments or tax areas that the KRA may impose on them.
[43:16] Advanced pricing agreements will come to solve that because it
[43:20] means that even
[43:20] SPEAKER_02: before I trade,
[43:21] I'll be able to enter into an agreement with KRA and probably
[43:24] agree on the 5%.
[43:26] SPEAKER_02: And as I operate my businesses,
[43:28] SPEAKER_02: I will know that from a transfer pricing perspective,
[43:31] SPEAKER_02: I am covered.
[43:32] SPEAKER_02: They are limited up to five years as per the provisions of the law,
[43:36] which I think is a considerable period for business sales to
[43:39] change or for the
[43:40] SPEAKER_02: metrics in the industry to change,
[43:43] which then means a revision or an update of the transfer
[43:46] presence can be done and
[43:47] SPEAKER_02: then a new or a revised agreement can then be entered into with KRA.
[43:53] SPEAKER_03: Thank you, Agnes.
[43:54] And I think also it's important to highlight that between
[43:56] Finance Bill and what
[43:58] SPEAKER_03: you're seeing in the Finance Act,
[43:59] there was the adjustment that in the event that you're found to
[44:02] have entered an
[44:03] SPEAKER_03: advanced pricing agreement on fraudulent or incorrect information,
[44:07] SPEAKER_03: then there will be consequences coming from the Revenue Authority.
[44:11] SPEAKER_03: Jilna,
[44:11] there was so much debate around Finance Bill and significant
[44:14] economic presence tax
[44:15] and whether we should have the 5 million annual turnover
[44:18] threshold or not.
[44:20] SPEAKER_03: What finally carried the day and where do you lie on this debate?
[44:24] SPEAKER_02: First of all,
[44:24] I wasn't even sure when significant economic presence tax was
[44:28] introduced and this
[44:29] SPEAKER_02: $5 million threshold was even introduced.
[44:32] SPEAKER_02: It just did not make sense to me from,
[44:34] SPEAKER_02: if I look at it,
[44:35] SPEAKER_02: remember this SEP tax is applicable to non-residents.
[44:39] And if you convert $5 million into USD,
[44:42] it just was a very small amount for them.
[44:44] SPEAKER_02: So they would anyways be caught in that bracket.
[44:47] SPEAKER_02: So I just never understood the limit in the first instance.
[44:51] SPEAKER_02: Anyways, we are where we are.
[44:53] SPEAKER_02: This limit has now been removed, so it will be applicable.
[44:57] I think they've aimed for this set tax to be applicable to all
[45:00] non-residents that
[45:02] SPEAKER_02: are in that space.
[45:03] SPEAKER_02: They've even expanded the significant economic presence tax,
[45:06] which was initially limited to the digital marketplace to now
[45:09] any services that are
[45:10] SPEAKER_02: supplied over the internet or electronic means.
[45:13] We're yet to see the application because as I think Frederick
[45:17] has already said,
[45:18] SPEAKER_02: the regulations and the fact that there is a whole May around this,
[45:21] SPEAKER_02: whether they will publish these regulations,
[45:24] SPEAKER_02: we're yet to see.
[45:25] So it's caused a bit of confusion even for non-residents when
[45:29] they query this tax.
[45:31] But we're yet to see any clarifications on this and how
[45:34] successful it's also been.
[45:36] SPEAKER_02: We are not sure at the moment as we speak.
[45:39] SPEAKER_03: Thank you for that, Jilna.
[45:40] SPEAKER_03: And coming over to Fred,
[45:41] SPEAKER_03: one of the things which I raised in the debate around finance bill was,
[45:45] should we be debating fundamentally about the rate of
[45:48] significant economic presence
[45:50] SPEAKER_03: tax as opposed to whether or not we should be having a threshold?
[45:52] Because as Jilna said,
[45:53] and I fully agree,
[45:54] the 5 million just didn't make sense to begin with.
[45:57] SPEAKER_03: Fred.
[45:58] SPEAKER_01: As far as the threshold is concerned,
[46:00] SPEAKER_01: in my view,
[46:00] SPEAKER_01: I would think that maybe there is need to have a threshold.
[46:03] SPEAKER_01: And the reason I say that is because sometimes,
[46:05] SPEAKER_01: and I think as you just mentioned that in our previous discussion,
[46:09] SPEAKER_01: that sometimes you've got to look at the costs of compliance,
[46:12] SPEAKER_01: as far as what the tax that whatever is yielding.
[46:15] The fundamental problem that I think came in with that
[46:18] particular proposal is that
[46:20] SPEAKER_01: the 5 million threshold was not qualified,
[46:24] SPEAKER_01: whether it was jurisdiction-based or it was worldwide revenue.
[46:27] SPEAKER_01: So if it is going to be worldwide level new,
[46:29] SPEAKER_01: which is what most of us did interpret it to be,
[46:32] SPEAKER_01: because in the absence of that credit,
[46:34] SPEAKER_01: then it was already safer to interpret it that way.
[46:36] Then it means that threshold that was under Section 12 was as
[46:40] good as nonexistent.
[46:42] SPEAKER_01: And I think that is where GILNA is coming from.
[46:44] But what about saying that we specify in the law that there's a
[46:49] threshold of 5
[46:50] SPEAKER_01: million,
[46:50] SPEAKER_01: but that 5 million is billed
[46:52] SPEAKER_01: on the 11 news that the non-resident company makes in Kenya.
[46:57] SPEAKER_01: Because you can imagine if you're making less than 5 million,
[47:00] SPEAKER_01: sometimes the cost of hiring a consultant because you're not here,
[47:03] SPEAKER_01: you know,
[47:04] SPEAKER_01: that headache of trying to transform money,
[47:05] sometimes it may just outweigh the benefit of even the
[47:08] government receiving that
[47:09] SPEAKER_01: amount.
[47:09] SPEAKER_01: And we have actually seen taxpayers who are in that category.
[47:12] SPEAKER_01: So for me,
[47:12] SPEAKER_01: I think they should have clarified,
[47:14] SPEAKER_01: and we did submit on that,
[47:15] SPEAKER_01: them to clarify whether it's a junior base.
[47:17] SPEAKER_01: And actually, if you look at the best practice, Julian's,
[47:20] Look at countries like India and even Nigeria who have
[47:23] implemented this CEP,
[47:24] SPEAKER_01: you actually notice that they have thresholds,
[47:26] SPEAKER_01: only that in their respective jurisdictions,
[47:28] SPEAKER_01: they have been able to specify and make it very clear.
[47:31] SPEAKER_01: And also the 5 billion,
[47:32] SPEAKER_01: whatever number,
[47:33] is also well benchmarked to ensure that you are achieving the
[47:36] objective that you
[47:37] need to achieve and not just throwing out a number there that
[47:40] you may end up not
[47:41] SPEAKER_01: achieving the objective that you're going to achieve.
[47:43] SPEAKER_01: But having said that, I think CEPT is an area that is growing.
[47:46] SPEAKER_01: We are likely to see many changes.
[47:47] Maybe there's the next exempt and related things that we will
[47:51] be seeing each and every year.
[47:52] SPEAKER_01: I don't know.
[47:53] As you can clearly see,
[47:54] we are still not agreeing on this matter,
[47:56] even on this discussion.
[47:57] SPEAKER_03: Agnes, where do you lie on this debate of tax and the threshold?
[48:02] SPEAKER_02: I concur with what Fred and Jilna have raised.
[48:05] SPEAKER_02: And especially when you talk of the threshold,
[48:07] SPEAKER_02: are we referring to what you earn in Kenya,
[48:10] SPEAKER_02: which would make a bit of sense?
[48:12] Or are we referring to the income that the company earns from a
[48:16] global perspective?
[48:17] SPEAKER_02: So my second question would be,
[48:19] this is coming after the repeal of DST and the formula of CET
[48:24] being the 30%
[48:25] SPEAKER_02: Chinese.
[48:27] SPEAKER_02: that the result and rate being 3%.
[48:30] SPEAKER_02: So the question we ask ourselves is,
[48:32] SPEAKER_02: before we even came with this amendment of the Finance Act of 2025,
[48:37] SPEAKER_02: SLEPT had been introduced through the Tax Laws Amendment Act.
[48:40] SPEAKER_02: During the six-month period,
[48:42] SPEAKER_02: how much has the revenue authority collected from this specific tax?
[48:45] So that now we are able to weigh,
[48:47] as Fred was pointing out,
[48:49] the cost-benefit of it.
[48:51] SPEAKER_02: Because these are non-resident,
[48:52] SPEAKER_02: they are out there,
[48:53] SPEAKER_02: there's the transactional changes,
[48:55] SPEAKER_02: the exchange rate expenses,
[48:57] them needing to hire someone who understands taxes in Kenya and
[49:00] all that.
[49:01] SPEAKER_02: What are the cost benefits of it?
[49:03] I feel like as much as it's a good tax because it broadens the
[49:06] tax bracket,
[49:07] SPEAKER_02: there should be clearer regulations.
[49:10] SPEAKER_02: And I think we wait to see.
[49:11] SPEAKER_02: As you were mentioning, we already late.
[49:13] SPEAKER_02: The law started in December.
[49:15] SPEAKER_02: Six months are needed to have regulations.
[49:17] So I think we wait to see that the regulations will provide
[49:21] more clarity and more
[49:22] SPEAKER_02: considerations.
[49:23] SPEAKER_02: And especially in this space where non-residents are not in Kenya yet,
[49:27] SPEAKER_02: they are required to submit attacks that is in Kenya.
[49:31] SPEAKER_03: Thank you very much,
[49:32] SPEAKER_03: Agnes,
[49:32] and we would like to close significant economic presence tax at
[49:35] that point.
[49:36] SPEAKER_03: Let me come back to Fred.
[49:37] SPEAKER_03: One of the things which almost surprised,
[49:39] SPEAKER_03: I think,
[49:40] SPEAKER_03: a good number of us is that when we saw on the floor of the House,
[49:42] SPEAKER_03: Section 12F of the Income Tax Act being repealed,
[49:45] SPEAKER_03: and we have effectively done away with the digital assets tax,
[49:49] SPEAKER_03: something which came about very recently via Finance Act 23.
[49:53] Fred,
[49:53] where is the government coming from with this,
[49:55] and did you see this move coming?
[49:57] SPEAKER_01: I was actually surprised to see the debut of digital asset tax,
[50:00] SPEAKER_01: considering what we have just mentioned.
[50:02] SPEAKER_01: I think it came into effect on 1st of September of 2023.
[50:04] So it means that we have not even hit 24 months since these tax
[50:09] were introduced.
[50:10] What was in the finance bill was actually a reduction of the
[50:13] rate from 3% to 1.5%,
[50:17] SPEAKER_01: which was then speaking to maybe the outcry that has been out there.
[50:20] SPEAKER_01: But having said that,
[50:21] SPEAKER_01: Julian,
[50:22] I think there was a fundamental challenge or problem with the
[50:25] way this particular
[50:26] SPEAKER_01: rule was drafted.
[50:27] If you recall,
[50:28] the 3% digital asset tax was actually based on the transaction
[50:32] value.
[50:32] What it actually meant is that the owner of a platform where
[50:35] you are exchanging
[50:36] some of these virtual assets would be required to limit 3% on
[50:41] the amount that has
[50:42] SPEAKER_01: been transacted.
[50:43] SPEAKER_01: which basically means if you are to use an example of a bank transfer,
[50:47] SPEAKER_01: if you are transferring a million,
[50:49] SPEAKER_01: then that 3% is based on the million that you are transferring.
[50:52] You can see a problem right there because the million does not
[50:55] necessarily mean
[50:55] SPEAKER_01: that it is income that you have delivered or accrued from Kenya.
[50:58] SPEAKER_01: It definitely may mean that whatever is being transferred,
[51:01] you have actually made a loss in a certain transaction in
[51:04] trading of some of these
[51:05] SPEAKER_01: virtual assets like cryptocurrency.
[51:06] So there was a problem right there in terms of the way the same
[51:10] was drafted from the one go.
[51:11] SPEAKER_01: And I think when we were doing these submissions,
[51:13] we saw quite a number of players in this particular sector
[51:16] trying to plead the
[51:17] SPEAKER_01: government,
[51:17] SPEAKER_01: look,
[51:18] SPEAKER_01: we are actually probably even taxing capital.
[51:20] And I think that is when there was the thinking that they
[51:23] should review the base.
[51:24] If we look at how this digital asset tax is actually done in
[51:27] other countries or how
[51:28] virtual assets are passed in other countries such as France and
[51:31] even the UK,
[51:33] mostly it is either business income in terms of how much has
[51:36] someone made from a
[51:37] SPEAKER_01: certain transaction.
[51:38] SPEAKER_01: Say you have traded a cryptocurrency.
[51:40] SPEAKER_01: How much have you made from that particular transaction?
[51:42] SPEAKER_01: So you pay either capital gains tax on the gain that you have made.
[51:45] SPEAKER_01: Or you actually pay business income.
[51:47] SPEAKER_01: If you're an individual,
[51:48] SPEAKER_01: you're subject to the gain that you have to the pay brackets,
[51:51] SPEAKER_01: and then you pay the tax,
[51:52] SPEAKER_01: which is what the best practice dictates.
[51:54] But I believe the review from 3% to 1.5% was in recognition
[51:58] that maybe the
[51:59] government is still doing a bit of research to know how this
[52:02] sector should be
[52:03] SPEAKER_01: taxed.
[52:03] And I understand there is actually a task force that has been
[52:05] set within the
[52:06] Lebanon Authority for them to do a bit of research and see what
[52:09] is the optimal way
[52:10] SPEAKER_01: of taxing this particular sector.
[52:12] But I think the key thing also to mention is that though
[52:14] digital asset tax has been
[52:16] SPEAKER_01: dropped,
[52:16] I think you have seen the introduction of excess duty on the
[52:19] fees that is charged
[52:20] SPEAKER_01: by these owners of platform.
[52:22] SPEAKER_01: That is the virtual asset service providers,
[52:24] which is I think at the rate of 10% on the fee that they do
[52:27] charge their customers.
[52:28] SPEAKER_01: So I think there will still be some sort of revenue there.
[52:31] But I expect a lot of noise as far as taxation of virtual
[52:34] assets is concerned in
[52:35] the next few years as the government tries to put their finger
[52:39] on how this sector
[52:40] SPEAKER_01: should be taxed.
[52:41] SPEAKER_03: As a matter of fact,
[52:42] SPEAKER_03: we have the virtual asset service provider still,
[52:45] which has just gone through Parliament and is still actually in
[52:48] the House going
[52:48] SPEAKER_03: through the vigours of the legislative processes.
[52:50] SPEAKER_03: We shall keep an eye on that to see how that pans out.
[52:53] Taking forward our conversation on income tax changes,
[52:56] let me come to Jill now.
[52:58] And we have seen changes on investment allowances for
[53:00] investments of a billion
[53:02] shillings plus and for hotel buildings and buildings for
[53:04] manufacturing that had
[53:06] SPEAKER_03: been proposed for deletion,
[53:07] SPEAKER_03: now being retained as per the Finance Act.
[53:10] SPEAKER_03: How crucial is this, Jilla?
[53:12] SPEAKER_02: I think the fact that we are looking at deletion of the 100% allowance on
[53:17] SPEAKER_02: investments that are very capital or intensive,
[53:20] SPEAKER_02: such as your buildings for manufacturing or hotel buildings,
[53:25] SPEAKER_02: they're looking at millions.
[53:26] SPEAKER_02: There was also investment in an SEZ that was also proposed to be deleted.
[53:31] So that means there will no longer be any allowance on that and
[53:35] it will revert back
[53:36] SPEAKER_02: to the normal rates of investment allowances.
[53:40] SPEAKER_02: So because it was specific to manufacturing sector,
[53:43] SPEAKER_02: all these would have been heavily affected,
[53:45] SPEAKER_02: obviously.
[53:45] The fact that they've actually been retained gives comfort that
[53:48] you can now claim
[53:49] SPEAKER_02: the 100% allowance.
[53:51] SPEAKER_02: However,
[53:52] SPEAKER_02: on the flip side,
[53:53] SPEAKER_02: remember,
[53:53] you can claim 100% in that first year of use once you make that
[53:58] investment.
[53:58] SPEAKER_02: But remember, if you invest billions...
[54:01] Your claim is in billions in terms of the capital allowances or
[54:05] investment
[54:06] SPEAKER_02: allowances,
[54:06] SPEAKER_02: as we call them.
[54:07] SPEAKER_02: Remember, your tax losses have now been obviously curbed at five years.
[54:11] So the maximum that you can carry forward is anyways limited to
[54:15] five years
[54:16] SPEAKER_02: If it's huge and you're not able to recover the 100% claim,
[54:20] SPEAKER_02: say it takes around 12 years or 10 years to recover that over time,
[54:24] then from year five only you'll not be able to recover since
[54:28] your loss would be
[54:29] SPEAKER_02: capped unless you make a specific application to the cabinet secretary.
[54:34] for another extension of five years,
[54:36] but that would be now on a case-by-case basis.
[54:39] SPEAKER_02: So there's no guarantee.
[54:40] SPEAKER_02: So how comfortable would an investor,
[54:42] SPEAKER_02: a foreign investor be,
[54:44] SPEAKER_02: who was investing billions,
[54:46] SPEAKER_02: say,
[54:46] SPEAKER_02: in an industry,
[54:48] SPEAKER_02: and then you're telling him that,
[54:49] SPEAKER_02: okay,
[54:49] SPEAKER_02: the maximum that this can be carried forward,
[54:51] SPEAKER_02: because by the time you recover,
[54:53] SPEAKER_02: is only up to five years,
[54:54] SPEAKER_02: because then we have the tax loss issue also coming in.
[54:58] SPEAKER_03: Julian,
[54:58] SPEAKER_03: now that you've touched the issue of the carry forward of tax losses,
[55:02] SPEAKER_03: perhaps at five years,
[55:03] we have been here before and I've struggled with where the
[55:06] government is coming
[55:07] SPEAKER_03: from with this adjustment,
[55:08] SPEAKER_03: because this was the case earlier from 2009,
[55:11] SPEAKER_03: I think,
[55:11] SPEAKER_03: and then we had to adjust it and the point where we were in 2020,
[55:14] SPEAKER_03: where it was now carried forward almost in infinity.
[55:17] And here we are again,
[55:18] where exactly is the government coming from with this?
[55:21] I think I'm also baffled because I would also like to see how
[55:24] many companies are
[55:25] SPEAKER_02: actually in a loss that goes on beyond,
[55:28] SPEAKER_02: I would say,
[55:28] SPEAKER_02: 10 years,
[55:29] SPEAKER_02: to be honest,
[55:30] because it's very rare to find someone who's always in a tax
[55:34] loss position.
[55:35] It's a very handful,
[55:37] maybe,
[55:37] of industry taxpayers that would come in that bracket.
[55:40] SPEAKER_02: But a majority of them,
[55:42] if you look at the capital-intensive industries that we are now
[55:45] trying to say,
[55:46] SPEAKER_02: let's bring in foreign investors,
[55:48] SPEAKER_02: let's put in investments in the economy,
[55:50] SPEAKER_02: We're looking at a lot of money that you're expecting people to put in,
[55:54] SPEAKER_02: and you're saying to them,
[55:55] SPEAKER_02: the car being this loss.
[55:57] SPEAKER_02: So what are we really attracting?
[55:59] SPEAKER_02: I don't know.
[56:00] SPEAKER_02: But the basis that many people are not paying taxes,
[56:03] SPEAKER_02: but you see the taxes are still being paid in terms of PAYE,
[56:07] SPEAKER_02: VAT,
[56:08] SPEAKER_02: import duties,
[56:09] SPEAKER_02: you name it.
[56:09] SPEAKER_02: There's still another portion of tax that is still being collected,
[56:13] SPEAKER_02: if not CIT,
[56:14] SPEAKER_02: for example,
[56:15] SPEAKER_02: from that industry,
[56:16] SPEAKER_02: for example,
[56:16] SPEAKER_02: who's saying that tax loss position.
[56:19] But I'm yet to see any data as to how many taxpayers in reality
[56:23] are we really talking about.
[56:25] SPEAKER_03: Frederick Agnes, any thoughts on this carry forward of tax losses?
[56:28] Yes,
[56:29] Julian,
[56:29] I'd be happy to give my comments and especially on the tax
[56:32] losses.
[56:33] SPEAKER_02: As you've mentioned, this is one of the laws that has been changing.
[56:36] SPEAKER_02: I think it started with losses.
[56:38] SPEAKER_02: Infinity went to four years, went to 10 years.
[56:41] SPEAKER_02: Infinity, now we are back to five years.
[56:43] SPEAKER_02: So my question is,
[56:44] I'm an investor who made a decision to invest billions of
[56:48] shillings based on the
[56:49] SPEAKER_02: fact that I can claim my tax losses to infinity.
[56:52] SPEAKER_02: Then a few years down the line, the same changes to five years.
[56:56] SPEAKER_02: Where does that leave me?
[56:57] And just as Jill now was talking of the window to apply through
[57:01] the CS for an
[57:02] SPEAKER_02: extension,
[57:02] it's a good move as opposed to what was in the bill that only
[57:06] provided for losses
[57:08] SPEAKER_02: up to five years and that was it.
[57:09] SPEAKER_02: But then again, it's not a guarantee, as she mentioned.
[57:12] SPEAKER_02: So when I'm making strategic decisions as an investor,
[57:15] I don't want to base my decisions on something that is 50-50 or
[57:20] something that I'm
[57:20] SPEAKER_02: not sure about.
[57:21] SPEAKER_02: And again, to speak of
[57:23] SPEAKER_02: Companies that have huge tax losses,
[57:25] there are companies that have probably been given the
[57:28] investment deductions at
[57:29] SPEAKER_02: 100%,
[57:30] SPEAKER_02: at 50%.
[57:31] SPEAKER_02: So are we giving with one hand and taking with the other?
[57:34] So why give me 100% investment deduction just for you to come
[57:38] and take with the
[57:39] SPEAKER_02: losses five years later?
[57:40] SPEAKER_02: And just to mention,
[57:41] these huge companies that actually have the huge losses because
[57:45] they invested huge
[57:46] SPEAKER_02: capital bring more than taxes to the table.
[57:48] SPEAKER_02: They are the ones that will provide employment.
[57:50] They are the ones that will enable the economic status of a
[57:53] certain area to grow significantly.
[57:56] So can we look beyond the taxes that we are collecting and
[57:59] focus more even on the
[58:00] economic growth of the country and the benefits that come with
[58:04] huge investors or
[58:05] SPEAKER_02: high capital intensive investors?
[58:07] SPEAKER_01: Do you want to think about this?
[58:08] SPEAKER_01: Yeah, sure, sure, Julian.
[58:09] SPEAKER_01: And I agree with Jill and Agnes 100%.
[58:13] SPEAKER_01: When I saw this provision,
[58:14] SPEAKER_01: it's one of those cases where you actually,
[58:16] SPEAKER_01: it's almost tantamount to trying to kill a mosquito using a hammer.
[58:20] SPEAKER_01: Maybe just use that phrase.
[58:22] SPEAKER_01: Because when you look at the spirit behind it,
[58:24] the way it has been advanced by the policymakers is that there
[58:28] are companies that
[58:29] SPEAKER_01: are reporting losses.
[58:30] year in,
[58:31] year out,
[58:31] and in their thinking is that the books are actually not
[58:35] correct.
[58:35] SPEAKER_01: You can imagine most of the companies that have this level of investment,
[58:39] SPEAKER_01: even the level of audit that they actually go through,
[58:41] SPEAKER_01: live around the career audits,
[58:42] SPEAKER_01: but even the financial audits.
[58:43] SPEAKER_01: So I don't believe that is the case.
[58:45] There could be one or two companies,
[58:47] but would the one or two companies actually justify
[58:51] allowing tax losses for companies that have incurred that
[58:55] particular expenditure.
[58:56] SPEAKER_01: For me,
[58:56] I do believe that the government should be able to audit such
[59:00] companies and they
[59:01] have powers under the various tax statutes for them to then
[59:04] assess any additional
[59:05] tax that they believe should have been paid based on the books
[59:08] that are not very
[59:09] SPEAKER_01: accurate.
[59:09] SPEAKER_01: But for me,
[59:10] SPEAKER_01: Julian,
[59:10] SPEAKER_01: I think the bigger problem,
[59:11] SPEAKER_01: and I said correctly here,
[59:13] SPEAKER_01: maybe we could look at it.
[59:14] SPEAKER_01: When you look at that particular change,
[59:16] SPEAKER_01: especially on the extension,
[59:18] I see a bit of technicality in there because the Finance Act
[59:22] 2025 appears to amend
[59:24] SPEAKER_01: a section that was already issued by the Finance Act of 2022.
[59:27] So I think there will be a bit of conversation there in terms
[59:30] of is that extension
[59:31] even there in the first place if the Act is actually amending
[59:34] an unexistent section
[59:36] SPEAKER_01: under the law.
[59:36] SPEAKER_01: So there's a bit of conversation there.
[59:38] SPEAKER_01: And I do.
[59:39] And I think there are quite a number of provisions which then
[59:41] begs the question in
[59:42] SPEAKER_01: terms of our tax laws that we have on maybe Kenya law,
[59:46] whether they are actually up to date or whether there are some
[59:48] still provisions
[59:49] SPEAKER_01: that are existing there and whether they actually need a bit of cleanup.
[59:52] SPEAKER_01: But I think that is just for us to think around.
[59:55] SPEAKER_01: I could be wrong in terms of whether that section actually do exist.
[59:59] SPEAKER_01: But based on my peruse of the Act,
[1:00:01] it appears like that section was already deleted by the Finance
[1:00:03] Act of 2022.
[1:00:04] SPEAKER_01: Jolians.
[1:00:06] SPEAKER_03: Thank you Fred for that.
[1:00:07] SPEAKER_03: We need to wrap up this conversation in 10 minutes.
[1:00:08] SPEAKER_03: So I have one question to go.
[1:00:10] What do you think to many of us by surprise were the changes to
[1:00:13] betting and gaming
[1:00:14] SPEAKER_03: with holding tax?
[1:00:14] We have seen the change from winnings to withdrawals and the
[1:00:17] rate coming down from 20 to 5%.
[1:00:18] SPEAKER_03: What do you make of this?
[1:00:21] SPEAKER_02: Yes, there was the provision that revises the rate to 5%.
[1:00:25] And also there has been the new definition or rather the
[1:00:28] repealing of the term
[1:00:29] SPEAKER_02: winnings and introduction of the term withdrawals.
[1:00:33] So the 5% will now be applicable on what the punta withdraws or
[1:00:38] what the punta is
[1:00:40] SPEAKER_02: after they have made their bets.
[1:00:42] SPEAKER_02: So my thoughts on this are first,
[1:00:43] SPEAKER_02: when we think of betting from a moral perspective,
[1:00:46] SPEAKER_02: with the taxes that are in place,
[1:00:48] SPEAKER_02: are we encouraging betting or are we discouraging betting?
[1:00:51] SPEAKER_02: And especially when we look at the youth,
[1:00:53] SPEAKER_02: and I would say there has been a lot of,
[1:00:55] SPEAKER_02: I don't know whether it's the right to use the word addiction to betting,
[1:00:58] SPEAKER_02: whereby there's too much betting of it that feels uncontrollable,
[1:01:01] SPEAKER_02: which from a moral perspective is not a good thing.
[1:01:04] SPEAKER_02: So when the tax rate moves to 5% from the initial 20%,
[1:01:09] SPEAKER_02: my question is,
[1:01:10] SPEAKER_02: what exactly guides that new provision?
[1:01:13] SPEAKER_02: And just to also note that even under excess duty,
[1:01:17] SPEAKER_02: there are also some adjustments on betting whereby the definition or
[1:01:21] SPEAKER_02: the amount that is now applicable to excess duty is the deposit.
[1:01:25] The amount that a beta or a punta deposits in their phone is
[1:01:29] taxed outright.
[1:01:30] SPEAKER_02: So it's like the rate has reduced from an income tax perspective,
[1:01:33] SPEAKER_02: but then when we go to excess duty,
[1:01:36] SPEAKER_02: the amount that is being applied tax on has been expanded.
[1:01:39] SPEAKER_02: I think for me,
[1:01:40] I still feel like betting is a tax or something that should
[1:01:45] suffer from something
[1:01:46] SPEAKER_02: we used to call
[1:01:47] SPEAKER_02: SIM tax or a tax that is applied to discourage certain activities.
[1:01:52] SPEAKER_02: I feel like moving it to 5% is not in line with the discouraging betting,
[1:01:58] SPEAKER_02: but then again,
[1:01:58] SPEAKER_02: when you put it from the side of excess duty,
[1:02:00] SPEAKER_02: where a broader amount has been covered,
[1:02:02] SPEAKER_02: I think there's a bit of balance on both laws in the finance act.
[1:02:07] SPEAKER_01: Well, not much, Julian.
[1:02:09] SPEAKER_01: I think I do agree with the comments by Agnes 100%.
[1:02:13] The question is why we keep seeing these changes in this
[1:02:15] particular sector.
[1:02:17] And I think Agnes has mentioned quite a number of fundamental
[1:02:19] things there,
[1:02:20] SPEAKER_01: including the policy behind these stats.
[1:02:22] The only thing that I may want to mention is that now we appear
[1:02:25] to be moving from
[1:02:27] SPEAKER_01: taxing the winnings,
[1:02:28] SPEAKER_01: again,
[1:02:29] SPEAKER_01: the concept of income,
[1:02:30] SPEAKER_01: and actually taxing even the amount that someone has ticked.
[1:02:34] SPEAKER_01: Remember,
[1:02:34] SPEAKER_01: the current law,
[1:02:35] SPEAKER_01: especially from a withholding tax perspective,
[1:02:37] SPEAKER_01: is only imposing withholding tax on the gain that you make after betting.
[1:02:41] Say you place a bet of 100 shillings,
[1:02:43] you are paid 110,
[1:02:45] the tax is only on the 10.
[1:02:46] SPEAKER_01: And I would imagine that is why probably the rate was a bit high.
[1:02:49] SPEAKER_01: But now the way the law appears to have been worded,
[1:02:52] SPEAKER_01: it appears like the tax will be on the total withdrawal,
[1:02:55] SPEAKER_01: which is 110.
[1:02:55] SPEAKER_01: So if you impose a 5% on the 110, obviously it's a very high tax.
[1:03:00] SPEAKER_01: But again,
[1:03:01] this one seems to contradict some case laws that I've actually
[1:03:04] seen where one of
[1:03:05] the betting companies has actually successfully petitioned the
[1:03:08] court and argued
[1:03:10] SPEAKER_01: that it is not right to tax the amount of money that someone has taken.
[1:03:13] So I think this is one of the provisions that you'll wait and
[1:03:15] see how it will be
[1:03:17] SPEAKER_01: implemented and whether maybe there could be some petitions on the firm.
[1:03:22] SPEAKER_02: And maybe I can add a comment on the same that,
[1:03:25] SPEAKER_02: I don't know,
[1:03:25] maybe perhaps the whole point of doing that is I think the
[1:03:29] intention was to collect
[1:03:30] SPEAKER_02: a lot of taxes.
[1:03:31] SPEAKER_02: In the previous regime,
[1:03:32] they did not collect because a lot of these betting companies
[1:03:35] moved offshore and
[1:03:36] SPEAKER_02: obviously also the money moved offshore.
[1:03:39] So I think just to try and see if this way they can try and
[1:03:42] retain the money.
[1:03:44] All the companies back to Kenya is probably something that
[1:03:47] they're intending to do,
[1:03:48] SPEAKER_02: although I'm not 100% sure if that has been the real intention.
[1:03:52] SPEAKER_02: We are yet to see on that, Frederick.
[1:03:53] That's just what I thought was the reason of maybe changing it
[1:03:57] and relaxing the rate.
[1:03:59] SPEAKER_02: Although,
[1:04:00] SPEAKER_02: as you're right,
[1:04:00] SPEAKER_02: as you say,
[1:04:01] SPEAKER_02: if you really work it backwards,
[1:04:02] SPEAKER_02: it ends up being a bit more higher as opposed to a lower rate.
[1:04:06] And I agree with Jilna because when you look at the news in the
[1:04:09] recent past,
[1:04:10] I think there was a bit of a fright in terms of most of those
[1:04:13] companies leaving
[1:04:13] SPEAKER_01: Kenya and going up to set elsewhere.
[1:04:16] Maybe that has also informed some of the changes that we have
[1:04:18] actually seen.
[1:04:19] SPEAKER_00: Mokaya here will go thrown out.
[1:04:21] SPEAKER_00: Twitter sometimes acts up.
[1:04:23] But he wants us to allow you to give your closing thoughts on
[1:04:26] this and perhaps also
[1:04:27] SPEAKER_00: cover some of the other things that may not have been covered so far.
[1:04:31] SPEAKER_00: We'll start with Jilna and then Fred in that order.
[1:04:34] SPEAKER_02: Thank you, Eric.
[1:04:35] SPEAKER_02: I think for me,
[1:04:36] SPEAKER_02: in terms of closing thoughts,
[1:04:39] SPEAKER_02: this act has obviously,
[1:04:41] SPEAKER_02: from the finance bill,
[1:04:42] SPEAKER_02: I can see a lot has been listened to from the public,
[1:04:46] SPEAKER_02: I'll say that.
[1:04:47] SPEAKER_02: But a lot has also been brought in, which was previously not there.
[1:04:52] SPEAKER_02: So I think in terms of impact,
[1:04:55] SPEAKER_02: we are yet to see how it's going to impact the affected industries,
[1:04:59] SPEAKER_02: especially.
[1:05:00] SPEAKER_02: I've seen a lot of paper on excise duty sites.
[1:05:03] SPEAKER_02: There's a lot of add-backs,
[1:05:04] SPEAKER_02: introductions as well,
[1:05:06] SPEAKER_02: ceramics,
[1:05:06] SPEAKER_02: I would say,
[1:05:07] SPEAKER_02: even from an export and promotion levy.
[1:05:10] There have been a bit more introductions with even the rates
[1:05:12] being still kept for
[1:05:14] SPEAKER_02: at least the iron at 17.5.
[1:05:15] SPEAKER_02: So we get to see the impact, obviously, on that industry.
[1:05:20] SPEAKER_02: And I don't know what the intention eventually was for doing that.
[1:05:24] SPEAKER_02: I think we wanted to see a proper cleanup done.
[1:05:26] SPEAKER_02: That was the ask.
[1:05:27] SPEAKER_02: If this was supposed to be a cleanup,
[1:05:29] SPEAKER_02: we still find that a lot of the provisions still need a better cleanup,
[1:05:34] SPEAKER_02: yet that has been left behind.
[1:05:36] SPEAKER_02: So...
[1:05:37] SPEAKER_02: I don't know if it's just been an interim cleanup,
[1:05:39] SPEAKER_02: as I would call it,
[1:05:40] SPEAKER_02: and then maybe we'll see a better cleanup and a move towards,
[1:05:43] SPEAKER_02: as Fred has also mentioned,
[1:05:44] SPEAKER_02: a move towards the MTRS,
[1:05:46] SPEAKER_02: because we're not seeing much time,
[1:05:48] SPEAKER_02: and I don't find that happening in the next bill.
[1:05:51] if we don't achieve the revenue collections as we see as
[1:05:55] intended in the tax
[1:05:57] SPEAKER_02: expansion,
[1:05:58] SPEAKER_02: because that's the whole aim of the bust is to do the tax expansion.
[1:06:02] SPEAKER_02: But we are yet to see that if that will actually work.
[1:06:05] SPEAKER_02: Thank you, Eric.
[1:06:07] SPEAKER_02: So for me,
[1:06:08] SPEAKER_02: my thought on the Finance Act of 2035 would be,
[1:06:12] and in comparison with the bill of 2024 that didn't make it to
[1:06:16] become an act,
[1:06:17] one thing that was loud or something that was seen clearly was
[1:06:21] that there were not
[1:06:22] SPEAKER_02: many changes on employment income,
[1:06:24] SPEAKER_02: that is pay as you earn,
[1:06:26] probably because the effect would have been felt directly by
[1:06:28] the people and also
[1:06:30] probably touching on the reactions that came up from the
[1:06:34] finance bill of 2024.
[1:06:35] SPEAKER_02: However,
[1:06:36] we still note a number of changes that are touching especially
[1:06:40] companies and
[1:06:41] SPEAKER_02: specifically investors.
[1:06:43] SPEAKER_02: So I feel like are we not focused on having investors come to Kenya or
[1:06:48] Why are our laws not aligning with encouragement or in giving
[1:06:52] incentives to
[1:06:54] especially high capital investors who in the long run results
[1:06:58] to our economy
[1:06:59] SPEAKER_02: developing?
[1:06:59] SPEAKER_02: But besides that,
[1:07:00] SPEAKER_02: I think just to agree with JINNA,
[1:07:02] a cleanup or a betterly done cleanup will be required just to
[1:07:06] ensure that the
[1:07:06] SPEAKER_02: provisions are clear and there are no contradictions in the law.
[1:07:11] SPEAKER_02: So otherwise,
[1:07:12] it's an act that we look forward to see how it will be
[1:07:15] implemented in the near
[1:07:16] SPEAKER_02: future and the repercussions that will arise,
[1:07:19] SPEAKER_02: especially from the regulations that we are waiting to see in six months.
[1:07:23] SPEAKER_02: Thank you.
[1:07:24] SPEAKER_01: Thanks to my co-panelers, Jean and Agnes.
[1:07:27] SPEAKER_01: So for me, it's probably just...
[1:07:29] Maybe to appreciate the policy makers in terms of some of the
[1:07:32] changes that we have
[1:07:33] SPEAKER_01: actually seen.
[1:07:33] SPEAKER_01: I think maybe for the first time in a long time,
[1:07:36] we can actually see some tangible input from the stakeholders
[1:07:39] being taken into
[1:07:40] SPEAKER_01: account.
[1:07:41] SPEAKER_01: I think we already have mentioned some of the proposals,
[1:07:43] SPEAKER_01: such as the one that was impacting on personal data and trade secrets.
[1:07:47] SPEAKER_01: run on agents and notices and quite a number of other couple changes that
[1:07:51] SPEAKER_01: Parliament did not accept to move forward,
[1:07:54] including the deletion of some of the critical products from
[1:07:57] the first schedule and
[1:07:58] SPEAKER_01: the second schedule as well,
[1:08:00] which is a good gesture then because that means that someone is
[1:08:03] listening to us.
[1:08:04] SPEAKER_01: But having said that,
[1:08:04] SPEAKER_01: of course,
[1:08:05] SPEAKER_01: there are some areas of improvement that I believe that they can do,
[1:08:08] SPEAKER_01: but I think it's a step towards the right direction.
[1:08:10] SPEAKER_01: I look forward to a day when,
[1:08:12] SPEAKER_01: as a country,
[1:08:13] SPEAKER_01: we don't just rely on short-term views and putting things on Excel.
[1:08:17] SPEAKER_01: Like,
[1:08:17] SPEAKER_01: for example,
[1:08:18] SPEAKER_01: saying that if we reduce the VAT rate from 16% to 15%,
[1:08:20] SPEAKER_01: the impact will be,
[1:08:21] SPEAKER_01: say,
[1:08:21] SPEAKER_01: 100 billion.
[1:08:24] by just looking at what you would have corrected without
[1:08:27] necessarily considering
[1:08:28] SPEAKER_01: the wider impact or what I would call the repo effects.
[1:08:32] SPEAKER_01: When you reduce the rate from 16% to 15%,
[1:08:34] SPEAKER_01: for example,
[1:08:36] SPEAKER_01: there's also the impact that you are likely to create more jobs,
[1:08:39] you are likely to increase a disposable income to your citizens
[1:08:42] and quite a number
[1:08:43] SPEAKER_01: of other factors that go in there.
[1:08:45] SPEAKER_01: So I think
[1:08:46] We should move from this conversation of just looking at the
[1:08:49] impact in one year and
[1:08:50] SPEAKER_01: not looking at the ripple effects of a certain change.
[1:08:53] SPEAKER_01: It was good to see that debate happening in Parliament this time round.
[1:08:57] SPEAKER_01: And we do hope that we'll,
[1:08:58] SPEAKER_01: in a short while,
[1:08:58] find ourselves in a place where we are not very myopic in terms
[1:09:02] of looking at some
[1:09:02] SPEAKER_01: of these changes.
[1:09:03] SPEAKER_01: By looking forward into the future,
[1:09:05] SPEAKER_01: my co-panelists have mentioned,
[1:09:06] I think it would be good to see what the final act of 2026 will
[1:09:09] come with or
[1:09:10] SPEAKER_01: whatever miscellaneous piece of registration we have.
[1:09:12] SPEAKER_01: But most importantly,
[1:09:13] We hope to see some of the things that have been mentioned in
[1:09:15] the medium-term level
[1:09:16] SPEAKER_01: strategy,
[1:09:17] SPEAKER_01: such as reduction of CIT rates,
[1:09:19] review of the payee bards and reduction of the VAT rate and
[1:09:22] some other good changes
[1:09:23] SPEAKER_01: that are expected.
[1:09:25] We hope to see them coming so that then it doesn't feel like
[1:09:28] the government is only
[1:09:29] SPEAKER_01: taking away from the citizens.
[1:09:30] I think it would be good to see the Finance Act of 2026 will
[1:09:34] actually be giving
[1:09:35] SPEAKER_01: back to the citizens and most importantly also to have changes.
[1:09:39] SPEAKER_01: that are geared towards spurring the economic activity in the country.
[1:09:44] SPEAKER_01: Thank you, Makaya.
[1:09:45] SPEAKER_00: Just one question, Fred.
[1:09:46] SPEAKER_00: Looking forward to 2026-27 in terms of planning,
[1:09:50] where can Kenyans get their voice heard as we work towards the
[1:09:54] 2026 finance bill?
[1:09:56] SPEAKER_01: I think the government has an elaborate calendar in terms of,
[1:09:59] SPEAKER_01: for example,
[1:09:59] SPEAKER_01: how the finance bills are published.
[1:10:01] SPEAKER_01: I think sometimes in November this year,
[1:10:02] SPEAKER_01: we do expect a call for public participation by the National Treasury,
[1:10:06] where we then put in our comments in terms of how we would want
[1:10:09] to see the tax
[1:10:11] SPEAKER_01: environment take shape.
[1:10:13] SPEAKER_01: There will then be other engagements with them sometime in March,
[1:10:17] SPEAKER_01: in which then they'll publish the bill by 30th of April of next year.
[1:10:21] And it comes back to the same cycle in terms of also submitting
[1:10:24] to the National
[1:10:24] Assembly and then having the bill go through Parliament and
[1:10:27] then assented to by the
[1:10:28] SPEAKER_01: president by that end of June of next year.
[1:10:31] SPEAKER_01: So in my view,
[1:10:32] SPEAKER_01: I think as stakeholders in this particular conversation,
[1:10:36] what is important to us is then to analyze our tax laws that we
[1:10:39] do have before us.
[1:10:40] SPEAKER_01: And when it is the light time to make the submissions,
[1:10:43] SPEAKER_01: then we engage the light people,
[1:10:44] SPEAKER_01: and that's including the National Assembly.
[1:10:46] So then we can shape the conversation in terms of what we see
[1:10:50] in the Finance Bill of 2026.
[1:10:52] SPEAKER_00: Thank you.
[1:10:53] The key takeaway was that there are steps that we can take in
[1:10:55] terms of being hard.
[1:10:56] In terms of the various things that you want to change before
[1:10:59] the Finance Bill
[1:11:01] SPEAKER_00: 2026,
[1:11:01] SPEAKER_00: it's published next year.
[1:11:02] SPEAKER_00: Thank you so much,
[1:11:03] SPEAKER_00: Giona,
[1:11:03] SPEAKER_00: Agnes,
[1:11:04] SPEAKER_00: Fred,
[1:11:04] SPEAKER_00: and our host was Zamboko,
[1:11:06] SPEAKER_00: who managed to guide the conversation very well.
[1:11:09] SPEAKER_00: Twitter sometimes acts up, but the conversation was very informative.
[1:11:12] SPEAKER_00: Thank you, our panelists.
[1:11:13] Thank you,
[1:11:14] our listeners,
[1:11:15] for taking time this Wednesday evening to be able to listen in.
[1:11:17] SPEAKER_00: On that note, I would say thank you once again.
[1:11:19] Maybe Fred,
[1:11:20] Agnes,
[1:11:20] and Gina,
[1:11:21] you can also say Kwaheri,
[1:11:22] and then we can close up.
[1:11:23] SPEAKER_01: Thank you, Makaya, and Kwaheri to our listeners.
[1:11:26] SPEAKER_01: It was a great pleasure having these conversations.
[1:11:28] SPEAKER_01: Looking forward to the subsequent ones.
[1:11:30] SPEAKER_01: Thanks, Makaya, for the opportunity.
[1:11:31] SPEAKER_01: Appreciate it.
[1:11:32] SPEAKER_02: Thank you, everyone.
[1:11:33] SPEAKER_02: Thank you, Eric and Amboko for this engaging conversation.
[1:11:37] SPEAKER_02: Thank you to my co-panelists.
[1:11:39] It has been an honor and a pleasure having this wonderful
[1:11:43] conversation and look
[1:11:45] SPEAKER_02: forward to many more.
[1:11:46] SPEAKER_02: Thank you.
[1:11:47] SPEAKER_02: Much thanks, Julianne, my panelists, Fred, and Jilna.
[1:11:51] SPEAKER_02: Thank you all listeners for joining in.
[1:11:53] SPEAKER_02: Looking forward to interact in more sessions in future,
[1:11:56] SPEAKER_02: even as we continue to understand the laws,
[1:11:58] SPEAKER_02: expenditures,
[1:11:59] SPEAKER_02: and
[1:12:00] SPEAKER_02: other matters that touch on our economy.
[1:12:02] SPEAKER_02: Thank you all and have a good night.

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