Post on 08-Mar-2018
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Kenya Budget Analysis Seminar
June 2015
Diving deep
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Sub Saharan Africa GDP growth (%)Poised for growth
3
3.6
3.8
4
4.2
4.4
4.6
4.8
2013 2014 2015 2016 2017
• The World Bank forecast has
the region expanding at a
slower pace in 2015, with
growth averaging 4.2 percent, a
downward revision of 0.4
percent
• Prospects in Angola and Nigeria
have deteriorated because of
the sharp drop in the price of oil,
and in South Africa because of
the ongoing difficulty in
overcoming electricity problems
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Bullish dollar against African currenciesLCU/US$, percent change, year-to-date
4
Source: Bloomberg
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Equity indicesBear Markets all around
5
Nairobi Stock Exchange (NSE 20) Nigeria Stock Exchange (NSE 30)
Egyptian Stock Exchange (EGX 30)South Africa Stock Market
Source: Nigeria Stock Exchange, Trading Economics
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Crude Oil prices
6
Source: NASDAQ
•
• However, private consumption growth is
expected to slow in the oil exporters with cuts to
subsidies to alleviate pressure on budget result
in higher fuel costs
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
A snapshot of the Kenyan EconomyKenya is at the cusp of taking-off…
7
Positive sentiment over the first half of 2015 with analysts saying that the country’s GDP growth rate may even hit the 7% mark
The World Bank notes that external and internal balances are expected to improve significantly due to falling oil prices
Rising geothermal energy will also drive down electricity prices helping to keep inflation in check. Recent finds will reduce oil dependency even further
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
A snapshot of the Kenyan Economy…But we have to tackle the following challenges
8
Security is still a sticky issue and an
impediment to doing business
Tourism has suffered tremendous setbacks
as a result of the security situation in the
country
The country is likely to begin to go into election mode in 2016. We have to learn how to carry on
with business during elections
The war on corruption and financial
mismanagement has to be won in government
and private sector
The shilling has been weakening in recent
times, falling in May to its lowest point in since
November 2011
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Kenyan Economic outlookInflation
9
17.8
5.34.5
14
9.6
5.7
6.886.31
7.08 6.87
0
2
4
6
8
10
12
14
16
18
20
2008 2009 2010 2011 2012 2013 2014 March2015
April 2015 May 2015
Despite the fall of oil prices
locally, inflation has taken
an up-turn with housing,
water, electricity and gas
increasing over the past few
months
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Kenyan Economic outlookExchange rates
10
62.7
77.7 75.879.2
86.6 84.7 86.290.6
124.3
112.3
121.9 122.5
135.1 134 134.9140.9
90.2
109.5 108.9105.1
114.2108.7
114.3110.17
0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012 2013 2014
USD GBP EURO
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Infrastructure
• Standard Gauge Railway, Geothermal Power Development, enhance access to electricity, road network, modernization of harbours and airports
Security
• Lease financing of Police/Prisons motor vehicles, military modernization, Police Security Modernization, Police Medical Insurance Scheme, Police/APs Houses, AMISOM
Agricultural and industrial transformation
• irrigated agriculture, agri-business, flood control measures, food security
Key Highlights - Expenditures
12
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Youth and women
• Re-engineering National Youth Services, establishment of National Construction Company, support to SMEs, modernization and expansion of sports facilities
Education
• Free day secondary education, free primary education, sanitary towels for girls in school, school feeding program, increase quality and access to tertiary institutions, support the demand for increased school enrolment, e-learning programs, deployment of ICT learning devices
Health
• Managed equipment services project, free maternal services
Key Highlights - Expenditures
13
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Government Spending 2015-16
14
1,280.30
721.30
-
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
Recurrent spending Development spending
KE
S B
N
64%
13% 12%
36%
Source: Economic Survey 2015
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Government Spending 2015-16
15
27
441.5
59.2
31.5
405.4
63
154.6
335.8
112.5
258
35.2
244.9
20.5
18.5
5
79.3
0 50 100 150 200 250 300 350 400 450 500
Parliament
Consolidated Fund Services
Health Ministry
Social Protection,Culture and Recreation
Energy Infrastructure and ICT
Environment Protection,Water & Natural Resources
GJLOS
Education
National Security
County Allocation
CDF
Public Adminstration &International Relations
Economic and Commercial Affairs
Judiciary
Contigencies Fund
Agriculture ,Rural & Urban Development
KES BN
Source: Budget highlights 2015
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Kenya Budget 2015-16 Sources of Revenue
16
82.2
142.1
310.3
623.2
18.4
73.7
25.7
72.1
0 100 200 300 400 500 600 700
Import duty
Excise Duty
Value Added Tax
Income Tax
Investment Income
Other Taxes
Railway DevelopmentLevy
Ministerial A-I-A
KES BN
Source: Budget Policy Statement 2015
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Tax Collection 2010/11 – 2014/15 by Tax Regime
17
-
100
200
300
400
500
600
Taxes on income,Profits and Capital
Gains
Taxes on property Value Added Tax Taxes on otherGoods and Services
Taxes oninternational trade
transactions
Non-tax revenue
KE
S B
N
2010/11 2011/12 2012/13 2013/14 2014/15
Source: Economic Survey 2015
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Total Tax Revenue 2010/11 – 2014/15
18
626.67 695.89
763.83
945.24
1,130.10
1254.9
-
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
KE
S B
N
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Carry forward of tax losses
Residential rental income tax
Tax amnesty for tax payers
earning rental income
CGT on transfer of listed shares to
be taxed under withholding
Corporate Tax
20
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Exemption from withholding tax on
payments made by film producers to foreign
actors and crew members
Simplified gaming tax Tax on prize competition
Withholding tax on training services and
contractual fees for the extractive industries
Withholding tax on gains arising from sale
of shares
Withholding Tax
21
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Transport & Logistics Industry reprieve
Time limit for filing VAT refund claims
VAT in respect of goods and services purchased for use in film making exempted
ICT exemption for inputs for local assembly
Industrial and Recreational Parks exemption for inputs
Residents returning from countries operating left hand motor vehicles
Value Added Tax
22
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Specific import duty rate on sugar doubled
Increase of import duty on plastic tubes for
packing tooth paste and cosmetics, aluminum
milk cans and made up fishing nets
Withdrawal of stay of application of CET rate
on paper and paperboard products
Removal of import duty and stay of CET rate on
gas cylinders
Duty remission on nylon yarn and synthetic twine used in the manufacture
of fishing nets
Remission of import duty on semolina, the
raw material for making pasta
Customs Duty
23
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Goods, materials, equipment and other
supplies for official use by prison authorities will be exempt from import
duty
Reduction of Import Declaration Fees (IDF)
Exemption on import of cars by returning
residents
Introduction of a Miscellaneous Fee and
Charges Bill
Harmonization of export duty on raw hides and
skins
The Kenya National Electronic Single Window System
Customs DutyContinued
24
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Introduction of a stand-alone Excise Duty
Bill
Change of excise duty tax base to units of
quantity only
Removal of excise duty on bottled water
and goods that have no
harmful effects
Remission of excise duty on beer and wine
Enhancement of excise duty
on non biodegradable
plastics
Excise Duty
25
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
All classes of fossil fuels to attract
excise duty
Excise duty rate on alcoholic beverages
to be increased marginally
The hybrid tax regime for
cigarettes to be converted into a
specific one
Taxation of motor vehicles and motor
cycles to be changed into a
regime based on classes of age
Excise Duty
26
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Tax rebate scheme for apprenticeship programs
Increase in Road Maintenance Levy
Introduction of Tax Procedures Bill
Modernization of the Income Tax Act
Miscellaneous Amendments
27
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For banks, minimum core capital to be increased progressively from KES 1 billion to KES 5 billion by December 2018
Removal of requirements for annual licensing for banks and implementation of a non-renewable perpetual licence which CBK can withdraw if necessary
All banks will be required to use the KBRR as a basis for pricing credit
Miscellaneous AmendmentsBanking Sector
28
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Increase in the minimum core capital requirements for insurance companies, to KES 600 million for companies underwriting general insurance and KES 400 million for long term insurance business by June 2018
Risk based capital requirements pegged on the risk profile
Principle based investment framework
Removal of oppressive requirements for insurance agents
Miscellaneous AmendmentsInsurance Sector
29
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Security InfrastructureRecurrent spending
Health and education
Agriculture not enough
Hydrocarbons and mining
Deficits
EAC – Focus Areas
31
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Enlargement of tax base through
registration of 6,000 co-operatives
Rwanda - Corporate Tax
33
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Stay of application of duty or reduction of duty on the following
• Road tractors/ semi-trailers
• Transport vehicles between 5 to 20 tonnes
• Transport vehicles above 20 tonnes
• Public transport vehicles of between 25 and 50 people and those of above 50 people
• Sugar (less than 70 tons imported)
• Unprocessed rice
• Inputs in telecommunication sector
• Raw materials (as per specified list)
Rwanda - Customs & Excise Duty
34
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Improvement of use of the Electronic Billing Machine (EBM) through extending use to other taxes which are yet to be specified
Rwanda - Miscellaneous Amendments
35
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Decrease of the minimum
tax rate chargeable on
individual employment
income
Tanzania - Personal Tax
37
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Decrease in presumptive income tax
Removal of tax exemption on
government projectsExemption of income
arising from bonds issued by the East African Development Bank
Tanzania - Corporate Tax
38
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Duty reduction on imported
wheat
Increase duty rate on plastic
tubes
Duty remission on spaghetti raw materials
Stay duty remission on
soap raw materials (LABSA)
Import duty charge on
metal products used in
construction
Import duty reduction on
imported sticks for
manufacturing of matches
Tanzania - Customs & Excise Duty
39
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Duty remission on glucose syrup
Duty remission on fish nets
inputs
Increase of specific duty on imported sugar
Increase of specific duty on
imported rice
Stay of duty reduction on
buses to be used in the DRT project
Prisons to be included in the duty exemption
list
Stay of duty exemption in the
armed forces canteens
Tanzania - Customs & Excise Duty
40
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Presumptive tax and formalising the
informal sector
Enforcement of the use of Taxpayer
identification numbers
Thin Capitalization rules amended
Uganda - Corporate Tax
42
© 2015 Deloitte & Touche Budget Analysis Seminar 2015
Withholding tax on supply of goods
and services
Reduction of WHT rate on re-
insurance premium payments
Uganda - Withholding Tax
43
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Adjustment to excise duties
Introduction of excise duty for motor vehicle lubricants, chewing gum, sweets, chocolates and furniture
Removal of excise duty on incoming calls from Kenya, Rwanda and South Sudan
Increase in rates of environmental levy
Uganda – Customs & Excise Duty
45