Banks have started sharing customer data and balances with KRA
Banks in Kenya have initiated the exchange of information regarding foreign account holders with the Kenya Revenue Authority (KRA) in a concerted effort to combat tax evasion and curb the flow of illicit wealth. This move comes as part of the implementation of the common reporting standards (CRS), wherein countries commit to sharing taxpayer information seamlessly. Customers of several banks were informed on Thursday about the commencement of CRS, marking a significant step towards greater financial transparency.
Under the CRS framework:
individual account holders can expect their banks to furnish the KRA with details such as account balances, addresses, dates and places of birth, tax residency countries, and identification numbers.
Similarly, corporate entities will have their information reported, including registration location, entity type, and details of controlling persons.
This development follows the signing of the Tax Procedures (Common Reporting Standards) Regulations, 2023 by the Treasury Cabinet Secretary last year, mandating Kenyan financial institutions to disclose foreign account holder details to the KRA.
The exchange of information extends beyond Kenya's borders, as the KRA is set to share this data with 106 signatory countries, encompassing well-known tax havens such as Switzerland, Panama, and the British Virgin Islands.
In return, these countries are obligated to reciprocate by providing similar information to the KRA, thereby bolstering efforts to uncover assets concealed in offshore accounts.
Amid these measures, concerns have been raised by tax experts regarding the delicate balance between upholding customer confidentiality in compliance with the Data Protection Act and the imperative to combat tax evasion effectively.
Treasury took KES 258 billion in foreign loans in seven months
Kenya's National Treasury has secured a substantial Sh258 billion ($1.611 billion) in foreign loans over the past seven months leading up to January 2024. Much of this borrowing, totaling Sh118.8 billion ($742 million) for the 2023/24 financial year, consists of programme loans obtained on concessional terms from multilateral lenders.
In January alone, Kenya received a disbursement of Sh61.6 billion ($385 million) from the Trade and Development Bank (TDB), contributing to the significant total.
During this period, the country also obtained Sh74.9 billion ($468 million) in project loans. Notably, the prioritization of concessional funding sources by the National Treasury has resulted in lower receipts from external capital markets and commercial loan financing.
As of the end of January 2024, the cumulative disbursements of foreign loans represented 42.5 percent of the total net foreign financing anticipated by the end of June, equivalent to Sh606.9 billion ($3.789 billion).
Looking ahead, the National Treasury is expected to rely on additional concessional funds to meet its external borrowing target for the fiscal year. Kenya anticipates receiving Sh15.1 billion (€88 million) from the African Development Bank and Sh240.2 billion ($1.5 billion) from the World Bank Development Policy Operations. Furthermore, a significant boost came in January when the country secured a net amount of Sh109.6 billion ($684.7 million) from the International Monetary Fund (IMF).
ECONOMY
Kenya to tap the International Bond Market
Kenya is set to make a significant move in the international bond market today, aimed at raising funds to finance the buyback of the 10-year $2 billion (Sh321 billion) Eurobond, to calm investor concerns about the country's ability to repay this debt upon its maturity in June.
The unexpected issuance of this bond diverges from earlier expectations, as it was initially anticipated that the National Treasury would use the nation's forex reserves or proceeds from loans from multilateral lenders to fund the buyback.
In response to the buyback announcement, the Treasury opened the tender offer for bondholders interested in participating, with the buyback priced at the bond’s par or face value.
It was further stated that the financing for the buyback would stem from the proceeds of the newly issued Eurobond, the exact amount of which was not specified.
Additionally, sellers of the bonds will receive accrued interest, with the most recent interest payment having been made in January.
Investors reacted positively to the news of the buyback and the new bond sale, as demonstrated by secondary market yields on the 2024 bond trading on the Irish Stock Market dropping from 13.6 percent to 8.5 percent within an hour of the buyback disclosure on Wednesday afternoon, eventually settling at 9.6 percent by 4pm on Thursday.
The movement of secondary market yield and price acts as a measure of the risk assumed by investors, where declining yields and increasing prices indicate diminishing risk aversion, while the inverse signals growing risk concerns. This shift in market sentiment reflects the impact of the buyback and potential new bond sale on investor confidence and risk perceptions concerning the issuer
“The main concern for investors has been whether Kenya would afford to afford the outsized obligation of $2 billion towards retiring the maturing bond. The positive reaction to the buyback and new bond in terms of the yield movement therefore shows a level of comfort,” said Churchill Ogutu, an economist at IC Group (Mauritius).
TAX
Seven seas to pay KRA KES 900 Million in taxes
Seven Seas Technologies has been ordered by the Tax Appeals Tribunal to pay Kenya Revenue Authority (KRA) a sum of Sh900.4 million following the firm's unsuccessful defense against the tax agency's claims.
The technology company, which serves clients primarily in the financial services and healthcare sectors across Kenya and other African countries, failed to furnish additional documentation to counter KRA's assertions regarding value-added tax (VAT), pay-as-you-earn (PAYE), and withholding taxes.
KRA initiated the claim against Seven Seas on August 27, 2020, covering the period from 2015 to 2019. Despite Seven Seas' objection to the demand on September 22, 2020, KRA reaffirmed its position in a letter dated March 10, 2021. The Tax Appeals Tribunal, in a decision issued on January 26, 2024, sided with KRA, asserting that the tax demand from the respondent was indeed valid and enforceable, effectively rejecting Seven Seas' appeal.
The tribunal's ruling concluded that Seven Seas' appeal lacked merit, leading to the dismissal of their case. Among the issues raised by KRA were requests for invoices regarding third-party transactions and evidence concerning Data GRS, a South African company engaged by Seven Seas for a project in collaboration with Safaricom called XABA.
TRANSPORT
Kenya Airways and Air Europa sign a code-sharing agreement
Amid a surge in air travel demand, Kenya Airways (KQ) has inked a code-sharing pact with Air Europa, Spain's third-largest airline. This collaboration aims to broaden KQ's European and US reach. Under the agreement, Air Europa passengers can now access Nairobi via Amsterdam, while KQ travelers gain seamless connections to Madrid, Palma de Mallorca, New York, and Miami.
Expressing enthusiasm about the partnership, Martin Gitonga, KQ’s head of network planning and alliances, highlighted the added convenience for travelers to Europe and the United States. Noting Air Europa's existing partnership within the SkyTeam Alliance, Gitonga emphasized the mutual benefits for guests, emphasizing enhanced access and connectivity.
Code-sharing arrangements, such as this, allow airlines to sell seats on the same flight, streamlining the travel experience for passengers. With the purchase of a single ticket and a single check-in process, travelers benefit from seamless connections at transit points. As part of this collaboration, KQ will extend its codeshare to four Air Europa routes, while Air Europa will reciprocate by placing their code on Kenya Airways' Amsterdam to Nairobi flight.
WHAT YOU MUST HAVE MISSED
NSE received regulatory approvals to run over-the-counter (OTC) bond dealings alongside the existing onscreen trading.
The Nairobi Securities Exchange (NSE) has received regulatory approvals to run over-the-counter (OTC) bond dealings alongside the existing onscreen trading.In OTC trades, bond buyers and sellers deal with one another directly, including negotiating prices.
The approval, which amends the Capital Markets Authority (CMA) fixed-income trading rules, transforms the NSE secondary bonds market into a hybrid fixed-income market.
Vivendi’s Canal + submits offer to acquire South Africa’s Multichoice
French media giant Vivendi's Canal+ submitted an offer to acquire South African pay TV company MultiChoice Group, the company said in a statement on Thursday.Canal+, which is a major shareholder in Vivendi with a 31.67 percent stake according to LSEG data, said it would pay a cash consideration of 105 rand ($5.61) per MultiChoice ordinary share, and is also aiming to obtain a listing in South Africa.
Pension returns shrunk below the inflation rate for the second year
A periodic pension industry survey done by fund administrator Zamara shows that pension schemes made a weighted average return of 1.4 percent in 2023, which was lower than the 1.7 percent return recorded in 2022.
At the same time, Kenya’s average inflation stood at 7.7 percent in 2023, meaning that the average saver lost value in real terms. This was the second straight year of pensions failing to beat inflation after the 2022 return trailed the 7.64 percent average increase in cost of living.
Zamara said the sub-par returns last year were caused by an underperforming equities market, as well as fair value losses on bond holdings after a sharp increase in yields caused prices to retreat in the secondary market.