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

Tanzania's Finance vMinister Mustafa Mkullo

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 off ocus 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 theUnited Kingdom, Switzerland and the United States by direct access to www.deloitte.com/ke and through social media (47% Facebook, 20% Hoot suite 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 by91% 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 incentivesto stimulate SMEs' growth and expansion into East African Community (EAC). In support of this, there was ageneral 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 therespondents believe that the harmonization of domestic taxes in the EAC will improve trade among themember 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 ofoffsetting other taxes such as instalment tax against pending claims since the delays are adverselyimpacting business cash flows which could result in economic and financial strain

For Source and more CLICK HERE