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2011 East Africa Budget Survey

If it’s covered, it counts

Last year’s budget brought in many changes, from the talk of trillion shilling budget in Kenya, Tanzanian tax cuts and a fairly boring budget in Uganda, one detail may have slipped by unnoticed: the complete lack of focus on the East African Community (EAC) common market – Deloitte in East Africa conducted a regional survey to find out if we can anticipate an integral integration. Deloitte East Africa’s annual pre budget survey was conducted in Kenya, Tanzania and Uganda to ascertain what the business community experienced after the 2010 Budget and what they would like to hear the finance ministers announce this year. Deloitte set out a variety of questions/statements reflecting expectations of the forthcoming government budgetary estimates against the backdrop of the current situation in the country and the world at large.

With a focus on the practical implications for companies in terms of both opportunities and challenges

including increased tax compliance, the survey covered expectations of all the major tax areas including

corporate taxes, VAT, customs and excise duties and transfer pricing, an area in which Deloitte East Africa

expects to see significant developments in the years to come.

The survey was distributed to over 1000 clients, 71% of it was completed by Kenyans, 16% by Tanzanians

and 13% by Ugandans. In addition, the survey was also accessed and completed by people residing in the

United Kingdom, Switzerland and the United States by direct access to www.deloitte.com/ke and through

social media (47% Facebook, 20% Hootsuite and 7% Twitter).

The results indicated a strong feeling that there should be shift of government role to regulator/facilitator rather than day to day involvement in business operations in all three countries. For example, it was discovered that the introduction of e-filling for taxes has satisfied more than 65% of the Kenyans as it has become easier to comply with KRA requirements and as a result over 95% of the Tanzanian respondents believe the introduction of an e-filing system of taxes to be introduced. In Uganda, the focus was not so much on how to comply, but more to reduce tax rates as a result of the current developments and expected revenues from the oil and gas industry. As a result, it is expected by 91% of the responses received that tax on petrol, diesel, kerosene and paraffin should be reduced. The feeling of being over taxed was emphasized and it was further suggested to create more tax incentives to stimulate SMEs' growth and expansion into East African Community (EAC). In support of this, there was a general consensus that EAC Taxes should be harmonized in all the member countries so that one country/business should not benefit or take advantage of the other. This coupled with the fact that 84% of the respondents believe that the harmonization of domestic taxes in the EAC will improve trade among the member states. It was further revealed that over 53% responded “more than 18%” when asked what rate of VAT would be appropriate. It is therefore, expected that should there be an adjustment in VAT rates the issue of VAT refunds must be addressed immediately, either in the form of timely refunds of enablement of offsetting other taxes such as instalment tax against pending claims since the delays are adversely impacting business cash flows which could result in economic and financial strain.

Media Statement

East Africa 2011 Budget Survey: If it’s covered, it counts

Our environmentally conscious respondents suggested that VAT and taxes on green technologies and their consumables should be lowered and the polluters should be penalised. It is expected that the regional governments will collaborate to introduce suitable environmental measures to combat global warming and adopt green technologies across all sectors. Across the EAC, all citizens anticipate for their finance ministers to read a budget that facilitates an integral integration or at least a platform for developing an appropriate framework so that the countries, businesses and people can benefit from this union.

Ends

Note to editors To review the full findings of the Deloitte East Africa 2011 budget survey and more on the East Africa Budget, please visit: www.delotte.com/ke

For the responses relating to the Kenya, Uganda, Tanzania and the East Africa Community, we found the following expectations:

Question Yes No Uncertain

Kenya

Do you think the personal tax brackets should be widened having remained unchanged for many years?

73% 26% 1%

Would you like to see the current corporate income tax rates reduced?

63% 28% 9%

Does the current system of National Social Security Fund contributions represent value for money for employers and employees in Kenya?

9% 85% 8%

Are you happy with the operation of the recently introduced e-filing for taxes in Kenya?

67% 19% 14%

The government should legislate a time frame within which tax refunds must be paid failing which interest at base lending rates should accrue.

97%

0% 3%

The government should legislate a reasonable time frame within which the KRA should raise queries on a tax return filed (with the KRA)

99% 0% 1%

The government should include new measures to promote domestic tourism in this years’ budget

93% 3% 4%

Do you believe that removal of zero rating and exemptions from the VAT Act as has been suggested will be beneficial for Kenyan business?

39% 49% 12%

Do you consider that tax on petrol, diesel, kerosene and paraffin should be reduced?

90% 6% 4%

Tanzania

Do you think the personal tax brackets should be widened in Tanzania?

52% 29% 19%

The exemption from property tax for old and disabled people has reduced their overall tax burden

40% 35% 25%

Would you like to see the current corporate income tax rates revised downwards?

48% 43% 10%

Does the current system of National Social Security Fund contributions represent value for money for employers and employees in Tanzania?

25% 65% 10%

Would you like to have e-filing introduced for all taxes in Tanzania?

90% 0% 10%

Did the reduction in the VAT rate from 20% to 18%, in the 2009 budget, have the desired effect of reducing prices?

24% 71% 5%

The extension of the requirement to withhold tax on the payment for the goods and services provided by non-TIN holders is bringing out the desired effect of substantial increase

14% 43% 43%

East Africa 2011 Budget Survey: If it’s covered, it counts

in tax revenue for the government

Do you think Tanzania would benefit from rejoining COMESA? 57% 5% 38%

Special relief on agricultural products is reducing business costs for farmers and encouraging growth of Export Processing zones

52% 24% 24%

Uganda

Would you like to see the current corporate income tax rates reduced?

64% 32% 4%

Does the current system of National Social Security Fund contributions represent value for money for employers and employees in Uganda?

27% 68% 5%

Do you think tax rates should decrease as a result of the current developments and expected revenues from the oil and gas industry?

64% 27% 9%

Would you like to see the threshold for PAYE and individual income tax increased from the current rate?

73% 27% 0%

Are you aware that you are required to declare and pay VAT on imported services?

86% 14% 0%

Do you consider that tax on petrol, diesel, kerosene and paraffin should be reduced?

91% 4% 5%

EAC

In your opinion, do you find the tax authorities in EAC generally helpful whenever you have sought their assistance?

31% 44% 25%

What rate of VAT do you think is appropriate for EAC?

53% 43% 4%

Do you think harmonization of domestic taxes in the EAC will improve trade among the member states?

84% 9% 7%

Do you think that the introduction of transfer pricing rules along international lines will benefit the respective economies of Kenya, Tanzania and Uganda?

70% 12% 18%

Has your organization benefited from the elimination of internal tariffs within the East African Community (EAC) Customs Union framework?

22% 55% 24%

Are you aware of the role of Customs Post Clearance Audits?

24% 66% 10%

Would you like to see effective sensitization at border/customs points to enhance better implementation of laws under EAC Customs Union?

92% 2% 7%

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