East African bud­gets tabled in par­lia­ments

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Celia Becker

KENYA, Rwanda, Tan­za­nia and Uganda pre­sented their 2015-16 bud­gets on 11 June. As fore­shad­owed by the bud­get re­views ear­lier this year, the bud­gets all re­flect in­creases from the 2014-15 year.

The Kenyan fis­cal bud­get is fore­casted at KES2.1-tril­lion ($22bn) and the econ­omy is ex­pected to grow by be­tween 6.5% and 7% in 2015-16. The to­tal rev­enue col­lec­tion by the Kenya Rev­enue Au­thor­ity is ex­pected to in­crease to KES1.358tril­lion. In line with Kenya’s Medium Term Plan II, which iden­ti­fies energy and in­fra­struc­ture as key en­ablers for sus­tained eco­nomic growth, more than KES330bn has been al­lo­cated to in­fra­struc­ture projects. In or­der to con­trib­ute to their fi­nanc­ing, the gov­ern­ment is ex­plor­ing pri­vatepub­lic part­ner­ships (PPS), es­pe­cially fo­cused on roads, elec­tric­ity gen­er­a­tion and the con­struc­tion of univer­sity hos­tels. The com­ple­tion of the Stan­dard Gauge Rail­way, link­ing Mom­basa to the main­land and other East African coun­tries is to be ac­cel­er­ated to 2017.

Sig­nif­i­cant pro­posed tax amend­ments in­clude an in­crease in the carry for­ward pe­riod for tax losses from four to 10 years and an ex­emp­tion from the pre­vi­ous 20% with­hold­ing tax for for­eign ac­tors and film crews. Non-res­i­dent min­ing sub-con­trac­tors will now be sub­ject to a fi­nal 5.625% with­hold­ing tax on gross ser­vice fees, whereas train­ing fees paid by petroleum or min­ing com­pa­nies to non-res­i­dent en­ti­ties will be sub­ject to a rate of 12.5%.

In or­der to ad­dress the ad­min­is­tra­tive com­plex­i­ties around cal­cu­lat­ing cap­i­tal gains on the sale of shares, it is pro­posed to levy cap­i­tal gains tax through a with­hold­ing mech­a­nism at a rate of 0.3% on the trans­ac­tion pro­ceeds of the sale of listed shares. Land­lords earn­ing less than KES10m from the rental of residential prop­erty are to pay a fi­nal with­hold­ing tax of 12% on the gross rental value.

Rwanda’s bud­get for 2015-16 is pro­jected at Rwan­dan francs (RWF) 1.768-tril­lion ($2.58bn), re­flect­ing an in­crease of RWF5.9bn on the 201415 re­vised bud­get. It was an­nounced that in 2015-16 the gov­ern­ment will fo­cus on im­ple­ment­ing ag­gres­sive re­forms to ad­dress vul­ner­a­bil­ity of agri­cul­tural pro­duc­tion and en­sure fast im­ple­men­ta­tion of pri­vate and public in­dus­trial projects. Eco­nomic growth is ex­pected at 6.5% in 2015-16, down from 2014’s 7%.

The bud­get to be funded by pro­jected do­mes­tic rev­enue col­lec­tions of RWF1,038.1bn (RWF938.6bn from tax rev­enue). It is ex­pected that donor sup­port grants will con­tinue to de­cline from 7.3% in 2014-15 to 5.7% in 2015-16 and to 4.6% in 2016-17.

Rwanda is cur­rently un­der­go­ing com­pre­hen­sive tax re­forms so no sig­nif­i­cant amend­ments were an­nounced. How­ever, a 1.5% in­fra­struc­ture de­vel­op­ment levy has been in­tro­duced on all goods im­ported from out­side the East African Com­mu­nity in or­der to fi­nance in­fra­struc­ture projects.

The 2015-16 Ugan­dan bud­get is es­ti­mated at Uganda shillings (UGX) 23.972-tril­lion ($8bn). Fi­nance Min­is­ter Ma­tia Ka­saija an­nounced that the econ­omy is ex­pected to grow at 5.8% dur­ing the next fis­cal year, as com­pared to 5.3% in 201415. Do­mes­tic rev­enues are ex­pected to in­crease to UGX11,333bn from UGX9,799bn in 2014-15, with tax col­lec­tion pro­jected at UGX9,577bn.

The gov­ern­ment in­tends to con­tinue its fo­cus on in­fra­struc­ture in­vest­ment, which will en­hance re­gional in­te­gra­tion and de­velop Uganda’s oil sec­tor.

Ka­saija said that the suc­cess­ful com­ple­tion of the Na­tional Iden­ti­fi­ca­tion Pro­ject, al­low­ing for the shar­ing of in­for­ma­tion by gov­ern­ment de­part­ments, agen­cies, min­istries, and lo­cal gov­ern­ments with the Uganda Rev­enue Au­thor­ity, is fun­da­men­tal in sup­port­ing the tax ad­min­is­tra­tion.

The VAT thresh­old (UGX50m since 1997) is to be re­vised to UGX150m. The thresh­old for us­ing a cash ba­sis of ac­count­ing for VAT pur­poses is to be in­creased from UGX200m to UGX500m.

The thin cap­i­tal­i­sa­tion rules have been amended to al­low firms to deduct in­ter­est on loans if the loans do not ex­ceed their share cap­i­tal by 150%. Thin cap­i­tal­i­sa­tion rules have also been ex­tended to branches of non-res­i­dent com­pa­nies. Ser­vices ren­dered by a non-res­i­dent for a pe­riod ex­ceed­ing 90 days in a 12month pe­riod is to be in­cluded in the def­i­ni­tion of “branch” as per the In­come Tax Act.

The with­hold­ing tax on rein­sur­ance premi­ums, which was in­tro­duced at 15% in July 2014, has been re­duced to 5%.

In an at­tempt to bring in­for­mal busi­nesses into the tax net, taxpayers will not be al­lowed to claim a tax de­duc­tion in re­spect of amounts ex­ceed­ing UGX5m in­curred on goods or ser­vices ac­quired from sup­pli­ers with­out a valid tax iden­ti­fi­ca­tion num­ber.

The Tan­za­nian bud­get for 201516 was in­creased from Tan­za­nian shillings (TZS) 19.8-tril­lion in 201415 to TZS22.495- tril­lion ($10bn). A growth rate of 7.2% is forecast for 2015-16 and the rev­enue au­thor­ity is ex­pected to col­lect tax rev­enue of TZS12,363bn, with non-tax rev­enue es­ti­mated at TZS13,475.6bn.

Tax pro­pos­als aimed at im­prov­ing rev­enue col­lec­tion in­clude elim­i­na­tion of dis­cre­tionary tax ex­emp­tions (with the ex­cep­tion of strate­gic in­vestors) and im­prov­ing the busi­ness cli­mate to at­tract in­for­mal busi­nesses to for­malise their oper­a­tions.

The mar­ginal tax rate for in­di­vid­u­als has been re­duced by from 12% to 11% on the low­est tax band (monthly in­come from TZS170,000 to TZS360,000). Gam­ing prize win­ners are to be taxed at 18% on the prize re­ceived.

In­come earned on bonds is­sued by the East African De­vel­op­ment Bank in the Tan­za­nia do­mes­tic mar­ket is to be ex­empt from tax, whereas gov­ern­ment projects fi­nanced through com­mer­cial loans will no longer be ex­empt from in­come tax with ef­fect from 1 July.

Spe­cial strate­gic in­vest­ment sta­tus is to be granted to in­vestors who in­vest at least $300m (in cash or as­sets), em­ploy at least 1,500 Tan­za­ni­ans and gen­er­ate for­eign ex­change or re­duce im­por­ta­tion.

Eco­nomic growth and im­proved tax col­lec­tion a ma­jor fo­cus

Celia Becker is an Africa Reg­u­la­tory and Busi­ness In­tel­li­gence ex­ec­u­tive at ENSafrica.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.