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Daily Nation : February 4th 2014
DAILY NATION Tuesday February 4, 2014 taxation industry Plan for independent customs body yet to take concrete shape National Treasury Cabinet Secretary says many models have been reviewed and a way forward is being prepared to be discussed with the Cabinet BY MUTHOKI MUMO ment announced its intention to split the Kenya Revenue Authority into two semi-autonomous entities, Treasury is still grappling with an ideal model for the separation. In the 2012 budget speech, former M WE ARE STILL DEVELOPING THE FRAMEWORK ON HOW THIS IS GOING TO BE DONE. National Treasury Cabinet Secretary Henry Rotich Finance minister Njeru Githae said the government would establish an independent customs body as part of efforts to align Kenya’s border operations with the regional integration drive. However, in an interview on Friday, National Treasury Cabinet Secretary Henry Rotich revealed that the autonomous customs body as envisioned in the 2012 Budget is not close to becoming a reality “We are still developing the framework on how this is going to be done. We have reviewed many models and are now preparing a way forward that we will discuss with the Cabinet,” said Mr Rotich. Although the Treasury has not yet firmed up a plan for the hiving off of customs operations from KRA, the gen- ELECTRICITY» ZEDDY SAMBU Delayed subsidy cash stalls power connections KENYA POWER has stopped making new electricity connections following a delay by the government to release money to subsidise costs. The firm is making connections only to those who applied between September and November, when the government released Sh2.7 billion to subsidise the cost. “The government extended a subsidy to Kenya Power to maintain the connectivity costs for three months between September and November, for 100,000 new connections, by injecting Sh2.7 billion. The subsidy has been exhausted,” said an official who cannot be named because he is not authorised to speak on such matters. Reversed decision Kenya Power asked for the money after the Cabinet reversed a decision to increase connection fees from Sh35,000 to Sh75,000. Citing increased prices of cables, transformers, poles, labour, and transport, the national power distributor said the Sh35,000 connection fee is FILE | NATION The government extended a subsidy to Kenya Power to maintain connectivity costs for three months between September and November, for 100,000 new connections by injecting Sh2.7 billion email@example.com ore than a year after the govern- eral concept currently being pursued by government technocrats little resembles the original 2012 proposal. Mr Rotich said there is a possibility that KRA will maintain its role of collecting revenue at ports of entry. However, all other border post management functions could be consolidated under one agency. “Our preliminary plan is that we need to focus on issues of revenue collection squarely on KRA and non-revenue related issues of other agencies playing a role under the border need to be managed under one agency,” said the Cabinet secretary. This would imply that the activities carried out by such bodies as the Kenya Bureau of Standards (KEBS) and the Kenya Plant Health Inspectorate Service (KEPHIS) at ports of entry would be absorbed by a yet-to-be-created agency. President’s directive Although this proposal differs slightly from the original plan of establishing an independent body to collect customs and manage border posts, it is similar to a directive issued by President Uhuru Kenyatta shortly after he assumed office last year. In June 2013, the president ordered all government agencies operating at the Port of Mombasa to take direction from the Kenya Ports Authority (KPA). Customs officers at the port would take orders not from Times Tower but from the managing director of KPA. The presidential directive was supposed to cut down on logistics at the port, thereby re- ducing the cost of doing business. Mr Rotich said that following delibera- tions with the Cabinet, a final proposal for reform of the Customs Department would be contained in the 2014 Finance Bill, which is expected to be tabled in Parliament later this year. Should this proposal be adopted, it is unclear the implications it will have on the drive by East African Community partner states — Kenya, Uganda, Rwanda, Burundi, and Tanzania — to harmonise customs collection at key points of entry into the region. The countries are planning to put all customs departments under a single regional body. As a precursor to this, Uganda and Rwanda have already begun collecting duty for cargo in transit at the Port of Mombasa under the Single Customs Territory. According to KRA Commissioner Gen- eral John Njiraini, by June this year Tanzania and Burundi are expected to join the Single Customs Territory. In the first quarter of the 2013/2014 fi- nancial year, KRA collected Sh80.9 billion from customs, or about 35.4 per cent of total revenues collected. Computerise customs The authority has been investing heav- ily in increasing efficiency in the customs department. Currently, KRA is acquiring a new system to overhaul customs management, replacing the SIMBA system which has been in use since 2005. The new system is expected to digitise customs operations, cutting down on interaction between traders and KRA agents. The development is expected to reduce corruption within the authority. Capital Markets to help counties raise revenue THE CAPITAL Markets Authority is now developing a framework to help county governments to raise money from the market. Speaking to Smart Com- pany, the authority’s acting chief executive officer, Mr Paul Muthaura, said the financing scheme — County Financing Collective Investment Tool — would outline the structures and procedures to be followed by county governments in raising revenue to develop their respective jurisdictions. Galvanise people “One of the things we are unsustainable. But speaking to Smart Company, Energy permanent secretary Joseph Njoroge said the ministry had engaged the government on additional funding. “Connection costs are still the same and government is chipping in,” Mr Njoroge said. Less than 30 per cent of the country’s population has access to power, with high electricity connection fees being blamed for this state of affairs. A study to determine exactly how much Kenya Power should charge for new connections is yet to be concluded. The study, which was commissioned by the Energy Regulatory Commission with funding from the French Development Agency, has since been taken over by the Ministry of Energy, according to a top ERC official. discussing with the National Treasury is the design of a County Financing Collective Investment Tool. If you want to raise money, say in Meru County, you need to have a way you can galvanise people and see how you can raise funds through structured investment schemes,” he said last Friday. The investment scheme being developed will provide a procedure on the nature of the share of the schemes to be invested in and the governance structure for their operation. This will enable counties to raise funds through products like unit trusts, but within the guidelines of the capital markets. “The procedure must be in a transparent manner, subject to effective oversight and governance so that whoever invests their money can trace where it went,” he said. Budgetary headaches He said counties cannot solely rely on tax revenues to fast-track development projects in their respective jurisdictions. County governments are currently facing budgetary headaches and have come up with different tax measures in their jurisdictions to raise money to run their affairs. The taxation measures have met with resistance across the county, with both residents and traders rejecting them. smart company 3 HICCUP » LAST JUNE, THE PRESIDENT ORDERED ALL STATE AGENCIES OPERATING AT THE PORT TO TAKE DIRECTIONS FROM KPA FILE | NATION National Treasury Cabinet Secretary Henry Rotich has revealed that the separate customs unit, as envisioned in the 2012 Budget, is not close to becoming a reality.
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