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East African Budgets Hike Taxes

by Lorys Charalambous,, Cyprus

19 June 2013

The East African Community member nations, Kenya, Uganda, Tanzania and Rwanda, held their Budget Day on June 13 for the 2013/14 fiscal year, and all raised taxes to fund growing infrastructure and economic development expenditure.

For example, Henry Rotich, Kenya's Cabinet Secretary for the National Treasury, disclosed a fiscal deficit for East Africa's largest economy of 7.9 percent of gross domestic product (GDP), or KES329.7bn (USD3.85bn), in 2013/14.

He intends to levy a tax on gaming and gambling winnings and look at enforcing the capital gains tax, as the Government seeks ways to increase revenues. To that end, the Kenya Revenue Authority is to be given the power to access companies' books of accounts; and income tax exemptions are to be placed under a streamlined tax, legal and regulatory framework.

Rotich also announced the introduction of a Railway Development Levy of 1.5 percent on all imported goods, in order to mobilize an additional KES15bn (USD175m) to fund construction of a standard gauge railway line from Mombasa to Kisumu.

In Uganda, which has seen a drop in development aid due to corruption allegations, the Finance Minister Maria Kiwanuka has had to confirm a UGX3.6 trillion (USD1.38bn) fiscal deficit, even after the imposition of new and increased taxes, and a review of income tax exemptions to increase revenue and improve administration.

Most of the Ugandan tax increases target the usual items – the duty on petrol and diesel, motor vehicle licenses, and excise duty on drinks and cigarettes – but the Government will also eliminate the value added tax (VAT) exemption on tourist hotel accommodation and also apply it on water supplies, impose 20 percent excise duty on gambling revenue to expand the tax base, and introduce a 10% levy on commission chargeable on money transfer through a mobile phone, together with a fee on all international incoming calls.

In Tanzania, Finance Minister William Mgimwa is to maintain the country's fiscal deficit within five percent of GDP by widening the tax base, particularly through identification of new sources of revenue, and a continuation of the policy of reducing tax exemptions from 4.3 percent of GDP in 2011/12 to 1 percent in the medium term, which will include a comprehensive VAT review.

While he proposed to reduce the minimum tax rate chargeable on individual incomes from 14 percent to 13 percent, Mgimwa also imposed an excise duty on all mobile services at 14.5 percent, instead of on airtime only, and widened the coverage of excise duty on telecommunications to include landlines and wireless telecom services.

In Rwanda, Laver Gatete, the Minister of Finance and Economic Planning, proposed the introduction of a new minerals royalty of four percent on the value of extracted base metals and of six percent on precious metals and stones.

TAGS: compliance | Finance | tax | business | value added tax (VAT) | tax compliance | royalties | gambling tax | oil and gas | excise duty | travel and tourism | gambling | Kenya | Rwanda | Uganda | tax breaks | construction | telecoms | individual income tax | Tanzania | services

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