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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.
 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 73% 26% 1%
having remained unchanged for many years?
Would you like to see the current corporate income tax rates 63% 28% 9%
reduced?
Does the current system of National Social Security Fund 9% 85% 8%
contributions represent value for money for employers and
employees in Kenya?
Are you happy with the operation of the recently introduced e- 67% 19% 14%
filing for taxes in Kenya?
The government should legislate a time frame within which tax 97% 0% 3%
refunds must be paid failing which interest at base lending rates
should accrue.
The government should legislate a reasonable time frame 99% 0% 1%
within which the KRA should raise queries on a tax return filed
(with the KRA)
The government should include new measures to promote 93% 3% 4%
domestic tourism in this years’ budget
Do you believe that removal of zero rating and exemptions from 39% 49% 12%
the VAT Act as has been suggested will be beneficial for
Kenyan business?
Do you consider that tax on petrol, diesel, kerosene and 90% 6% 4%
paraffin should be reduced?
Tanzania
Do you think the personal tax brackets should be widened in 52% 29% 19%
Tanzania?
The exemption from property tax for old and disabled people 40% 35% 25%
has reduced their overall tax burden
Would you like to see the current corporate income tax rates 48% 43% 10%
revised downwards?
Does the current system of National Social Security Fund 25% 65% 10%
contributions represent value for money for employers and
employees in Tanzania?
Would you like to have e-filing introduced for all taxes in 90% 0% 10%
Tanzania?
Did the reduction in the VAT rate from 20% to 18%, in the 2009 24% 71% 5%
budget, have the desired effect of reducing prices?
The extension of the requirement to withhold tax on the 14% 43% 43%
payment for the goods and services provided by non-TIN
holders is bringing out the desired effect of substantial increase
 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 52% 24% 24%
costs for farmers and encouraging growth of Export Processing
zones
Uganda
Would you like to see the current corporate income tax rates 64% 32% 4%
reduced?
Does the current system of National Social Security Fund 27% 68% 5%
contributions represent value for money for employers and
employees in Uganda?
Do you think tax rates should decrease as a result of the 64% 27% 9%
current developments and expected revenues from the oil and
gas industry?
Would you like to see the threshold for PAYE and individual 73% 27% 0%
income tax increased from the current rate?
Are you aware that you are required to declare and pay VAT on 86% 14% 0%
imported services?
Do you consider that tax on petrol, diesel, kerosene and 91% 4% 5%
paraffin should be reduced?
EAC
In your opinion, do you find the tax authorities in EAC generally 31% 44% 25%
helpful whenever you have sought their assistance?
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 84% 9% 7%

improve trade among the member states?

Do you think that the introduction of transfer pricing rules along 70% 12% 18%
international lines will benefit the respective economies of
Kenya, Tanzania and Uganda?

Has your organization benefited from the elimination of internal 22% 55% 24%
tariffs within the East African Community (EAC) Customs Union
framework?

Are you aware of the role of Customs Post Clearance Audits? 24% 66% 10%

Would you like to see effective sensitization at border/customs 92% 2% 7%

points to enhance better implementation of laws under EAC
Customs Union?

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