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The East African : January 6th 2014
52 JANUARY 4-10,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,901.12 -0.52% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 1,876.07 1.57% USE All Share Index Uganda 1,504.00 0.33% RSE All Share Index Rwanda 138.17 -0.40% JSE All Share Index South Africa 46,589.70 1.87% NGSE All Share Index 41,450.48 Nigeria - 0.54% Uganda follows Kenya in ≥eviewing its tax code T he squeeze is on. In an echo of last year’s decision by Kenya to reform its tax regime, Uganda plans to review its tax structure this year in a move that the International Monetary Fund in its latest review on the economy sees as a necessary evil. The IMF and the Ugandan government, the lender said in the review, plan to first conduct a study to inform how farreaching the reforms should go. But top on the list of priorities is the comprehensive review of exemptions under the Income Tax Act. A key action is the elimina- tion of exemptions on income derived from agro-processing, which now faces widespread opposition. Uganda also plans to amend the thin capitalisation rule to limit excessive use of relatedparty debt and to introduce a capital gains tax on the disposal of commercial buildings by residents. Tax reforms are usually a sensitive issue. In Kenya for example, the decision drew so much resistance that were it not on for the government’s majority in parliament, it would have failed. In Uganda, divisions in Uganda plans to eliminate exemptions on income derived from agro processing. Picture: File the Cabinet on the proposed amendments to the VAT Bill have already seen delays to the reforms. The government finds itself in a tight corner. At 13 per cent, the country’s tax-to-GDP ratio is low, even by EAC standards, and trails the African average of 20 per cent. Under the proposed EAC Monetary Union Protocol, the rate should go up to 25 per cent in the next decade. Considering that the rate had oscillated in the 10-13 per cent range over the past three decades, the 25 per cent thresh- The govt will review its tax register and ledger old is asking for much. The government has set a target of increasing the tax revenue to 0.5 per cent of GDP a year in the next three years, to narrow the gap with the regional average and reduce reliance on borrowing as well as donors. The main challenges have been low compliance, poor enforcement and the numerous tax exemptions offered to companies operating in the country. In addition, because the majority of Ugandans work in the informal sector, they have not been captured by the taxman. In the planned tax adminis- tration measures, the government says it will put particular emphasis on expanding audit coverage and reviewing the VAT register and ledger to ensure that the largest taxpayers can be accurately monitored. Large taxpayers, especially multinationals operating in different markets, have been known to take advantage of the varied tax laws to hide their tax burdens. In recent years, audits of large multinationals in Kenya have unearthed billions of shillings in tax evasion. Twitter @petero87 firstname.lastname@example.org CMA vs NSE: Who will win the fight fo≥ the futu≥es? KENYA’S CAPITAL markets regulator and the Nairobi Securities Exchange (NSE) are flexing their muscles. In an article sent to newsrooms last week, the Capital Markets Authority (CMA) said the proposed futures market, which will be run separately by the NSE, could hurt the stockmarket; investors in the old securities exchange and the new derivatives market will be treated differently, with the latter being favoured. “The divergence has centred on the inclusion of a three-year exemption for NSE to carry out the business of futures or derivatives exchange free from compliance with the statutory and regulatory requirements issued by the National Assembly and the Authority,” reads the opinion. In December, parliament signed the Capital Markets (Amendment) Act 2013 into law, setting the capital requirements for the NSE at Ksh500 million ($5.8 million), considered a “figure attainable by few.” The law allows the bourse to set its own rules for handling derivatives transactions and set- tling trade disputes, encroaching on the role of the regulator. CMA provides the avenues through which domestic and international funds flow; it now appears that NSE will play this role in the derivatives market. CMA has indicated that it will appeal to President Uhuru Kenyatta through the Treasury to change of the law to avert possible risks to market stability. Twitter @sckamau1 email@example.com Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories Investment fi≥ms get licences THREE INVESTMENT companies in Kenya have acquired new licences that will see them unlock additional resources in an increasingly competitive market. Centum Asset Managers and UAP Investments Ltd acquired licences to operate as real estate investment trust (REIT) managers. Genghis Capital Ltd, which acquired a licence to operate as an investment bank under the Capital Markets Act and Regulations, became the 11th authorised investment advisor on securities matters in the country. Analysts said Centum and UAP, the first REIT movers, are now able to unlock capital in the fast growing real estate industry across the region, subject to REIT rules. A REIT manager, according to CMA regulations, is a company licensed to provide real estate management services to a real estate investment trust.
December 30th 2013
January 13th 2014