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"id": 37099,
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"speaker_name": "Mr. Mbau",
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"legal_name": "Elias Peter Mbau",
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"content": "Mr. Temporary Deputy Speaker, Sir, we further needed to highlight on the question of zero rating policy. We are concerned about the zero rating policy by the Government, which has now been extended to non-priority items such as the security detectors and closed circuit television (CCTV) cameras. Indeed, even some of these items that have now been zero rated do not qualify to be the so-called essential commodities and, therefore, do not lead to the intended benefits to the common man. The committee thus recommends that when the Finance Bill 2011 is being reviewed, the issue of zero rating of all products be adequately considered so as to ensure that items that are not a priority to common mwananchi are removed from the list of zero rated items. Of course, we also noted that the Ministry needed to tighten administrative measures on tax collection further. We are proposing, as a committee, that in order to streamline tax collection, the Ministry needs to tighten rules for Pay As You Earn (PAYE) relief, increase withholding taxes for professionals from 5 per cent to 10 per cent, and introduce withholding tax on winnings from betting and lotteries at 20 per cent. Whereas these measures are expected to streamline tax collection and raise more revenue, they may be unlikely to resolve the rampant tax evasion menace of the targeted groups. In addition, some targeted taxes like winnings of betting and lotteries may be difficult to determine, assess and collect. The committee therefore recommends that when the Finance Bill, 2011 is being reviewed, the Minister be required to provide the measures the Government will adopt in order to enforce the applicable tax laws. In addition, it is the view of the committee that 20 per cent withholding tax be levied on winnings from lotteries and price competitions. We urge the Finance, Planning and Trade Committee to consider this issue as they review the Finance Bill. Mr. Temporary Deputy Speaker, Sir, many stakeholders, and even the Government, appreciate that Kenya’s tax laws need comprehensive reforms in line with modern day tax practices. The committee observed that this year, 2011, the Deputy Prime Minister and Minister for Finance did not propose any changes in the Value Added Tax (VAT) Act, with a promise that the whole Act will be overhauled, and presented to Parliament for approval. There is hope that the new VAT Bill will correct some of the existing problems towards realizing Government revenue. In addition, the Government should work to reduce the number of taxes and levies that Small and medium Enterprises (SMEs) have to administer to make it easier to train staff to administer compliance with tax liability. The committee, therefore, recommends that the said Bill be brought to Parliament for passing and implementation not later than October, 2011. Mr. Temporary Deputy Speaker, Sir, tax laws remain very complex to many taxpayers, with the effect that they become expensive to comply with. Organizations are, thus, faced with a big burden to employ or engage very expensive tax experts to help them. Even though turnover tax attempted to achieve this, it failed and even distorted the environment by only leaving it to individuals or business names, and excluding companies, rental income and consultancy. This market distortion, therefore, creates room for difficulty in implementation, and does open fronts for continued evasion. Mr. Temporary Deputy Speaker, Sir, as a strategy to further enhance collection of VAT, the committee recommends the modernization of Electronic Tax Register (ETR) machines to include GPRS, which stands for “General Package Radio Service”. The ETR control system based on GPRS terminals is designed to provide wireless connection of ETRs with the Kenya Revenue Authority (KRA) central server. This means automatic management and control of ETR from a central point. The system solves the problem of updating collection of data from trade with ETR located in remote locations regardless of their number. Collection of VAT revenue can be remitted according to the desired programme to the designated KRA account on daily, weekly and monthly basis, thereby enhancing both the cash flow of KRA and tax revenue collection. With the GPRS integrated system, VAT could be collected from the large numbers of small traders located anywhere in the country at minimum cost, thereby reducing tax evasion. The new generation GPRS integrated ETRs will, therefore, save costs and enhance collection of VAT. Mr. Temporary Deputy Speaker, as I end my presentation of this report, I need to mention and highlight some key priority areas for the 2011/2012 Budget that members of this committee were able to capture when they listened to and engaged the public across the country in line with Article 221(5) of the new Constitution, which requires that these estimates in being discussed and reviewed, hon. Members must in a structured manner constitute themselves and conduct public hearings. This was done on the 24th of June, 2011 in seven centers of this country, as earlier stated, and on 28th in Nairobi. The people around the country wished that the public hearings, which were undertaken on two days, should have been carried out earlier in the Budget making process to ensure their views did inform, and were included in, the various tax proposals as well as the various allocation proposals. Based on the revisions, the key priority areas are as detailed below. Mr. Temporary Deputy Speaker, Sir, top on the agenda of Kenyans as of today is food security or insecurity. On food security, the public is very concerned that the Government policy on this item is haphazard, unco-ordinated and does not recognize diversity in food needs in the country. The public also highlighted the frustration of the farmer regarding timely release of resources for procurement of farming inputs such as certified seeds, fertilizers and other farming implements. The committee is of the opinion that there is need to move away from consumption subsidies and emergency type of policies to more strategic production subsidy oriented policies to enable the farmers enhance production of food. Such strategies may include timely provision of affordable certified seeds, creation of a sustainable and inclusive strategy on livestock, food storage and post-harvest management, as well as research and development in the agricultural sector. In this regard, hon. Members will recall that one of the recommendations in the BPS was for the Government to make adequate provisions in the 2011/2012 Budget for building the required strategic food reserves and creation of a sustainable and inclusive livestock development fund meant for off-take and restocking with an initial capital of, at least, Kshs1 billion. In 2011/2012 Budget, Kshs1 billion has been provided for strategic grain reserve. However, only, Kshs400 million has been provided for the livestock off- take fund. The next big issue is the question of youth unemployment; this was faulted by the public as a strategy being used by the Government to alleviate the suffering of young people. Indeed, in most of the areas we visited, young people do not support the KaziKwa Vijana initiatives since it does not recognize skills and is not on a long term employment solution. An effective way of addressing the challenges of unemployment of our youth is to help them develop their skills in entrepreneurship and supporting them in small business development. Youth unemployment is a significant problem in Kenya. Kenya’s economy is currently dependent on agriculture. However, the youth are quickly moving from the rural areas to urban centres in large numbers. Therefore, most new entrants to the labour force must choose between working in small scale enterprises and being self employed. These factors have led to high levels of youth unemployment. Available data and statistics from the Kenya Bureau of Statistics indicate that 60 per cent of the Kenyan population is under the age of 35 years, whereas Kenya’s unemployment rate is estimated to be over 30 per cent among the working age youth and adults. This, indeed, is a very high figure compared to the status that other countries in our economic level of development find themselves in. A further estimated 64 per cent of our unemployed persons comprise the youthful population."
}