Ruth Ndichu.
Tax policy is closely linked to the economic growth in a country and any changes to the tax regime are bound to have an impact on the economy.
The push to generate tax revenues is driven by growing pressure on public budgets in a tough economic climate, and the need to reduce government deficits.
This, for any government, is a delicate balance between resource mobilisation to finance the expenditure without increasing the tax burden, while at the same time managing the national debt.
Global trends in tax policy and the international tax environment impact the strategies used by tax administrations to protect their revenue bases. At the same time, governments through the tax agencies seek to promote a good and competitive investment climate.
How well the government is able to achieve these two, often disparate, objectives is of critical importance to the economy.
In Kenya, for example, the national government projects to collect total revenue amounting to Ksh1.348 trillion ($13.7 billion) for the 2015/16 financial year. This is equivalent to 20.7 per cent of the nominal GDP.
The largest component of the revenue is attributable to income tax, followed by value added tax then excise tax.
To achieve these revenue targets, the government needs to re-evaluate the tax system in place and continue with the tax reforms that we have seen with VAT and now the proposed excise, income tax and tax procedure Bills.
Tax reforms must focus on, among other things, reductions and rationalisation of income tax rates, adopting measures to broaden the tax base and improving revenue administration.
In order to stay ahead of the collection targets, revenue authorities must constantly align themselves with evolving international best practice. A look at the global trends in taxation shows increased concerns on tax avoidance and transparency for multinational companies.
In August 2014, 44 members of the Organisation for Economic Co-operation and Development (OECD), issued a joint statement calling for a global standard for the automatic exchange of information between tax authorities.
Such information exchanges can help to clamp down on tax evasion and shift the burden of proof from tax authorities (who must currently identify tax evaders) to taxpayers, who would have to defend their corporate structures and transactions.
The Kenya Revenue Authority has in readiness, already set up an International Tax Office to cater for these transactions.
For instance, the Foreign Account Tax Compliance Act (FATCA) was passed in the US and it requires foreign financial institutions to provide information to the US Internal Revenue Service about any assets held by US persons in that country.
Currently, most of the financial institutions in Kenya, Uganda and Tanzania have applied to the FATCA and are already reporting to the US Internal Revenue Service.
In the recent past, the forums on tax administration have shone the spotlight on tax administration issues, with the aim of improving taxpayer services and tax compliance — by helping revenue bodies increase the efficiency, effectiveness and fairness of tax administration as well as reduce the costs of compliance.
KRA’s iTax platform and the proposed Customs management system is set to revolutionise tax administration in this region.
Two other international trends worth watching out for are taxation of the digital economy and group VAT registration.
The current tax legislation did not envisage e-commerce and with e-commerce gaining prominence, issues such as who has jurisdiction to tax income from e-commerce and where is such income generated have come to the fore.
These international tax developments will no doubt inform our own tax developments as a region.
Group VAT registration which is widely used in the developed countries to ease VAT refund and administration challenges, is perhaps one of the provisions that governments across the region ought to consider.
At the international level, the race to the bottom, which is a phenomenon by which developing countries grant significant tax concessions and rebates in order to attract foreign direct investment, is slowing down.
Therefore, we are also likely to see a slowdown in the types of tax rebates granted to investors, particularly as East Africa positions itself to take advantage of newly discovered mineral wealth.
Ruth Ndichu is a senior tax advisor with KPMG Kenya ([email protected]). The views and opinions here do not necessarily represent the views and opinions of KPMG.
FRENCH VERSION
Cela, pour tout public, est un équilibre délicat entre lamobilisation des ressources pour financer les dépenses sansalourdir la pression fiscale, tout en même temps gérer la dettenationale.
Tendances mondiales dans la politique fiscale et del’environnement fiscal international une incidence sur lesstratégies utilisées par les administrations fiscales pour protégerleur base de revenu. En même temps, les gouvernements à travers les agences de l’impôt visent à promouvoir un climatd’investissement bon et compétitif.
Façon dont le gouvernement est en mesure d’atteindre ces deuxobjectifs souvent disparates, est d’une importance cruciale pourl’économie.
Au Kenya, par exemple, les projets du gouvernement national depercevoir les recettes totales s’élevant à Ksh1.348 milliards ($ 13,7milliards) pour l’exercice 2015/16. Ce qui équivaut à 20,7 % duPIB nominal.
La composante la plus importante des revenus est attribuable àl’impôt sur le revenu, suivie de la valeur ajoutée d’impôt puis taxed’accise.
Pour atteindre ces objectifs de revenus, le gouvernement doitréévaluer le système fiscal en place et poursuivre les réformesfiscales que nous avons vu avec la TVA et maintenant l’acciseproposé, impôt sur le revenu et des procédures fiscales, factures.
Plate-forme iTax de KRA et le système de gestion douanièreproposé est définie à révolutionner l’administration fiscale danscette région.
Deux autres tendances internationales de la peine de regarderpour sont a imposition de l’économie numérique etenregistrement de Groupe TVA.
La législation fiscale actuelle n’envisage pas de commerce électronique et commerce électronique gagne de proéminence,des questions telles que qui a compétence à l’impôt les revenusdu commerce électronique et où ce revenu est généré ont mis enavant.
Cette évolution de la fiscalité internationale informera sans doutenotre propre sur l’évolution en tant que région.
Groupe d’enregistrement TVA qui est largement utilisé dans lespays développés pour faciliter le remboursement de la TVA etl’administration conteste, est peut-être l’une des dispositions queles gouvernements de la région devraient examiner.
Au niveau international, le nivellement par le bas, qui est unphénomène par lequel les pays en développement accorder desallégements fiscaux importants et rabais pour attirer lesinvestissements étrangers directs, se ralentit.
Par conséquent, nous sommes aussi susceptibles de voir unralentissement dans les types de dégrèvements fiscaux accordésaux investisseurs, en particulier comme des positions de l’Afriquelui-même profiter de nouvellement découvert richesse minérale.
Ruth Ndichu est un fiscaliste senior avec KPMG au Kenya([email protected]). Les vues et opinions ici ne représententpas nécessairement les vues et les opinions de KPMG.
