After rejecting the Finance Bill 2018 last week, President Kenyatta made various recommendations in his memorandum regarding the VAT on petroleum products and other matters that he feels the National Assembly did not handle appropriately with regards to addressing the budget deficit.
For instance, a part of the memorandum reads:
“In the course of approval of the Finance Bill 2018, the National Assembly removed other policy measures that had a revenue impact. In sum, the Finance Bill, as currently approved by Parliament, has created a funding gap of Sh48.6 billion. This is in addition to Sh18.9 billion in the Appropriation Bill 2018. We are, therefore, looking at a budget funding gap of Sh67.5 billion in the FY2018/2019.”
VAT On Petroleum Products
In the memorandum, the President notes that the extension of VAT on fuel for another two years will affect the “estimated Sh35 billion expected to be collected by the end of June 2019.”
The memorandum proposes amending Section 5, Subsection 2 of the VAT Act 2013 to read: “The tax rate in the case of the petroleum products listed in Section B of Part I of the First Schedule, eight per cent of the taxable value effective from the date of assent provided that the taxable value in respect of these goods shall exclude excise duty, fees, and other charges.”
President Kenyatta also suggests an anti-adulteration levy on illuminating kerosene in order to harmonize the price of kerosene to that of diesel.
Excise Duty on Money Transfers
The memorandum also recommends increasing the excise duty charged on money transfer fees by mobile money operators from 12 per cent to 20 per cent of their excisable value. In addition, the President proposes a 15 per cent rate to be charged on telephone and internet data services.
The proposed money transfer charge comes after tax on mobile money transfers was increased from 10 to 12 per cent this year.
Mobile operators such as Safaricom have already implemented this increase, which has resulted in Kenyans paying more to withdraw and transfer money via mobile phones. As a result, a further increase in excise duty could see the financial pressure on Kenyans added to an unbearable levels mainly because a lot of Kenyans rely on mobile money to make transactions each day.
These recommendations are meant to bridge a budget deficit of Sh7.6 million.
Betting, Gaming & Lotteries Tax
In May this year, the National Assembly turned down Treasury’s proposal to slash the tax on betting, gaming, lotteries, and prize competition from 35 per cent to 15 per cent. Now, the President’s memorandum is still proposing the same reduction.
Should Parliament approve this proposal, the Betting, Lotteries and Gaming Act will be amended to reflect the change.
Treasury also introduced this year a 20 per cent winning tax through the Income Tax Act.
National Housing Development Fund Contributions
The memorandum observes that Parliament rejected the proposal for employees and employers to contribute to the National Housing Development Fund.
This is a fund that was introduced through the Housing Act to support the government’s affordable housing agenda under the Big Four Plan.
The memorandum, therefore, proposes that employers should contribute 1.5 per cent of the employees’ basic salary and that “the employee’s contribution will be 1.5 per cent of the monthly basic employee’s salary.” The proposal also adds that the contribution should not surpass Sh5,000 monthly.
The contributions shall help employees to own a home under the affordable housing scheme which aims to build 500,000 housing units.
However, for employees who have contributed to the fund but are not eligible for affordable housing, their contributions will be transferred to a pension scheme upon retirement or after 15 years. The contributions can also be transferred to a spouse or dependent children, to another person registered and eligible for affordable housing, or ineligible employees can choose to receive the contributions in cash after tax deductions are made.
Failure to contribute to the fund each month will attract a penalty of five per cent of the contributions.
The Appropriation Act
To further address the financing gap, the President has proposed the amendment of the Appropriation Act by cutting down the National Government’s expenditure by at least Sh55 billion.
In his state-of-the-nation address last week, President Kenyatta proposed the reduction of government spending in hospitality, foreign and domestic travel, and training and seminars.
Parliament is this week debating these proposals as Kenyans wait for a verdict either against or for the memorandum.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.