Draft version, not yet officially authorized for quoting. James Kanali Kwatemba SJ, MA Kenya V: Laws governing taxes and tax-like contributions With contributions by Dr. Jörg Alt SJ, MA, BD Joerg [Wählen Sie das Datum aus] 1 Draft version, not yet officially authorized for quoting. Inhalt List of Graphics .......................................................................................................................... 4 List of Tables .............................................................................................................................. 4 1 Introduction ........................................................................................................................ 5 1.1 Tax environment .......................................................................................................... 5 1.2 Tax policy and system ................................................................................................. 5 1.3 Long term development strategy and tax policy formulation process ......................... 6 1.4 Stakeholder participation, lobbyism ............................................................................ 8 2 Main tax categories ............................................................................................................ 8 2.1 Definitions ................................................................................................................... 8 2.2 National and County Legislation ................................................................................. 9 2.3 Important tax categories ............................................................................................ 10 2.3.1 Taxation of (individual) income ......................................................................... 10 2.3.2 Taxation of turnover, consumption, goods and services, VAT .......................... 12 2.3.3 Cross-cutting: taxes relevant for businesses ....................................................... 13 2.3.4 Wealth relevant taxation ..................................................................................... 15 2.4 Important national tax laws ....................................................................................... 15 2.4.1 Tax Procedures Act ............................................................................................ 15 2.4.2 Capital Market (Amendment) Bill, Finance Bill ................................................ 16 2.5 International legal norms ........................................................................................... 16 2.5.1 Its importance ..................................................................................................... 16 2.5.2 Double Tax Agreements (DTAs) ....................................................................... 16 2.5.3 The Kenya-Mauritius DTA Court Case ............................................................. 18 2.5.4 Tax Information Exchange Agreements (TIEAs) .............................................. 19 2.5.5 OECD and other tax related legal instruments ................................................... 19 2.5.6 Kenya and EAC Integration ............................................................................... 20 2.5.7 Kenya and EPA .................................................................................................. 20 2.5.8 Tax Compact? AAAA? SDGs ............................................................................ 22 3 Tax allowances, reliefs, breaks, incentives, subsidies…. ................................................. 22 3.1 Nationally for individuals .......................................................................................... 23 3.2 Nationally for private wealth holder .......................................................................... 23 3.3 Nationally for socially beneficial purposes ............................................................... 23 2 Draft version, not yet officially authorized for quoting. 3.4 Nationally for businesses ........................................................................................... 23 3.5 Internationally for businesses .................................................................................... 27 3.6 Discussion .................................................................................................................. 28 4 Wealth taxation ................................................................................................................ 28 4.1 Why wealth taxes? ..................................................................................................... 28 4.2 Context issues of wealth taxation .............................................................................. 29 4.3 Categories and means of wealth taxation .................................................................. 30 4.3.1 Duties and lease rates ......................................................................................... 31 4.3.2 Withholding taxes .............................................................................................. 31 4.3.3 Capital Gains Tax ............................................................................................... 32 4.3.4 Discussion .......................................................................................................... 33 4.4 Income from real estate and real property ................................................................. 33 4.4.1 Definitions .......................................................................................................... 33 4.4.2 Why is taxation of real property of importance? ................................................ 33 4.4.3 The problem of ownership, valuation and registration ...................................... 34 4.4.4 Property Tax Base .............................................................................................. 35 4.4.5 Property Tax Rate ............................................................................................... 36 4.4.6 Exemptions from real property taxation ............................................................. 37 4.4.7 Taxation and effort to increase revenue ............................................................. 38 4.4.8 Discussion .......................................................................................................... 39 5 Transparency .................................................................................................................... 40 5.1 Banking secrecy vs. interest of tax administration to access relevant information ... 40 5.2 Corporate veil vs. interest of tax administration ........................................................ 41 5.3 Discussion .................................................................................................................. 41 6 IFF relevant issues ............................................................................................................ 41 6.1 Context issues ............................................................................................................ 41 6.2 Legal provisions to prevent IFFs ............................................................................... 43 6.2.1 National .............................................................................................................. 43 6.2.1.1 POCAMLA 2009 ........................................................................................ 43 6.2.1.2 POCAMLA 2017 ........................................................................................ 44 6.2.1.3 Anti Corruption & Economic Crimes Act .................................................. 45 6.2.1.4 Crime and Money Laundering (Prevention) Bill 2004 ............................... 45 3 Draft version, not yet officially authorized for quoting. 6.2.1.5 Tax Procedures Act ..................................................................................... 46 6.2.1.6 The Prevention of Terrorism Act and the Proceeds of Crime and Money- Laundering (Amendment) Act of 2010 ........................................................................ 46 6.2.1.7 Public Officers Ethics Act of 2003 ............................................................. 46 6.2.1.8 Other regulation .......................................................................................... 47 6.2.1.9 Discussion ................................................................................................... 48 6.2.2 International ....................................................................................................... 48 6.3 Loopholes .................................................................................................................. 49 6.3.1 National .............................................................................................................. 49 6.3.2 International ....................................................................................................... 50 6.4 Regulating the Kenyan “shadow banking” sector ..................................................... 50 6.5 Tax Amnesties ........................................................................................................... 51 6.6 Discussion .................................................................................................................. 51 7 Taxation of the informal sector ........................................................................................ 51 8 Green Taxes, taxes