Companies fail to pay corporate tax
At least eight in 10 companies in Kenya did not pay taxes on earnings in the last financial year, shedding light on the challenging economic conditions that have taken a toll on businesses.
According to statistics provided by the Kenya Revenue Authority (KRA), a mere 15% of the 862,336 firms registered for corporate income tax (CIT) for the year ending in June 2023 complied with their tax obligations. This stark non-compliance reflects the broader struggles faced by corporate managers dealing with dwindling sales in an environment of high inflation, which has significantly eroded earnings and consumer purchasing power.
KRA's data suggests that the share of registered companies that remained tax-compliant was even slightly lower than the previous year ending in June 2022. At that time, a revised 123,030 out of 759,568 firms paid their taxes on profit. Rispah Simiyu, the Commissioner for Domestic Taxes at KRA, emphasized the importance of compliance, stating, "A compliant taxpayer is a company that registers for the relevant tax obligations when required, files all returns on time, pays taxes promptly, and accurately reports information regarding their business transactions."
For resident companies, the annual profit tax rate stands at 30 percent, payable through quarterly installments, while foreign firms are subject to a rate of 37.5 percent.
Commercial Banks in Kenya Seek Record-High Liquidity Infusion from Central Bank
Commercial banks in Kenya turned to the Central Bank of Kenya (CBK) for a record-high liquidity infusion of nearly Sh100 billion on Monday, shedding light on a short-term cash crunch exacerbated by the recent Sh44.15 billion tea bonus payment to farmers.
The CBK took note of the skewed liquidity situation in the market and, in response, offered to inject Sh50 billion via seven-day reverse repurchase agreements (repos).
However, banks submitted bids amounting to a staggering Sh99.87 billion, all of which were accepted by the CBK at an average interest rate of 12.87 percent.
This liquidity boost through reverse repos, a form of securitized borrowing using Treasury bills and bonds as collateral, marked a substantial increase from the previous high of Sh87 billion provided to banks on June 19, 2023. The CBK's willingness to accept bids exceeding the intended Sh50 billion demonstrated a departure from its typical practice of adhering to set injection targets.
Kenya Announces Health Insurance Reforms
Parliament has proposed a series of transformative legislations. The new bills, namely the Social Health Insurance Act, of 2023, the Digital Health Act, of 2023, and the Facilities Improvement Financing Act, of 2023, collectively lay the groundwork for a comprehensive overhaul of the country's healthcare system.
The cornerstone of these reforms is the Social Health Insurance Act, of 2023, which, if approved, will necessitate formal sector workers to contribute 2.75 percent of their gross monthly pay to the Social Health Insurance Fund. Simultaneously, those in the informal sector will be required to contribute a fixed amount of Sh500 monthly. Needy Kenyans will receive government support, with both national and county governments contributing on their behalf. Moreover, the regulations will mandate all adults seeking government services to make contributions, while foreign visitors staying for more than 12 months will also be required to enlist in and contribute to the social health insurance scheme.
To ensure the integrity of the system, stringent penalties have been proposed for those who attempt to defraud the health insurance scheme. Offenders found guilty of fraudulent activities may face imprisonment for up to five years, a fine of Sh1 million, or both.
The transition to this new healthcare model also entails the winding up of the current National Health Insurance Fund (NHIF) by October 19, 2024. All financial assets held by NHIF will be transferred to the newly established Social Health Insurance Fund.
Safaricom Completes Acquisition of M-Pesa Holding Company
Safaricom announced the successful completion of its acquisition of M-Pesa Holding Company Limited from its parent firm, Vodafone Group PLC. This acquisition, which began in April of this year, marks a significant milestone for Safaricom as it now assumes full control of the mobile money service, M-Pesa.
In a statement released to newsrooms on Wednesday, Safaricom confirmed that it now holds a 100 percent stake in M-Pesa Holding Company, thereby making M-Pesa a wholly-owned subsidiary of Safaricom. M-Pesa Holding Company is the corporate trustee responsible for safeguarding M-Pesa customer funds, in compliance with the National Payment System Regulations of 2014. As an independent trustee, it oversees the administration of the trust and manages all customer deposits within the popular mobile money platform.
Vodafone initially revealed this transaction in May, and the acquisition was finalized with Safaricom paying a symbolic amount of $1 to the British multinational. This strategic move is expected to bolster Safaricom's cash flows and generate interest income by investing a portion of M-Pesa's substantial reserves in short-term securities. This development signifies Safaricom's commitment to enhancing its mobile money offering and solidifying its position in Kenya's dynamic financial services landscape.
Collections from the Petroleum Development Levy (PDL) Decrease by Nearly Ksh1 Billion in Year Ending June
In a recent report, official data from the Ministry of Energy and Petroleum has revealed that collections from the Petroleum Development Levy (PDL) took a significant hit, dropping by almost Ksh1 billion in the year ending June. The Kenya Revenue Authority (KRA) managed to collect Ksh25.2 billion from the levy during this period, marking a substantial decrease of Ksh904.5 million from the previous year's collection of Ksh26.1 billion.
This decline in PDL collections is seen as a clear indicator of the depressed consumption of super petrol and diesel in the country. It reflects the challenges posed by the rising costs of fuel, with the price of super petrol per liter increasing by Ksh2 to reach Ksh179.30 in March, and diesel seeing an even steeper increase of Ksh8 per liter, reaching Ksh168.40 in the monthly cycle that began on May 14.
The Petroleum Development Levy is crucial for stabilizing pump prices and providing relief to consumers. However, the drop in collections has compelled the government to allocate additional funding from the Exchequer to meet the escalating compensation demands. Energy and Petroleum Regulatory Authority Director-General Danie Kiptoo recently acknowledged, "The previous stabilisation needs were far beyond the level of funds that required support from the Treasury," highlighting the ongoing challenges posed by the fluctuating fuel market in Kenya.
WHAT YOU MIGHT HAVE MISSED
Family Bank poised for a significant regional expansion following the green light from its shareholders for a substantial Sh9.3 billion capital injection through a newly approved rights issue.
The bank will provide existing shareholders with one additional share for every two currently held, resulting in the issuance of a total of 643.5 million new shares at a price of Sh14.50 per share. This rights issue, which commenced on Thursday, is set to run until November 30, offering investors an enticing 10 percent discount on the six-month weighted volume-weighted average price of the bank's shares in the over-the-counter market. With this strategic move, Family Bank is primed to fund its next phase of growth and expand its footprint across the region.
The Primary Health Care Act, 2023
The recently enacted Primary Health Care Act, 2023, has laid the foundation for a network of community health units to be constructed throughout the nation. These units are poised to play a pivotal role in providing vital primary health care services at the grassroots level. Under the provisions of this groundbreaking legislation, each community health unit will cater to a catchment population of up to five thousand individuals, adhering to national guidelines. Implementation of this progressive initiative will be orchestrated by the 47 county governments, who will collaborate closely with the national government to ensure the realization of comprehensive Universal Health Coverage (UHC). This landmark law is set to be a cornerstone in the ongoing transformation of healthcare services, emphasizing the importance of primary care and equitable access for all.
The Kenya International Freight and Warehousing Association (Kifwa) implement strategy to combat price undercutting
The Kenya International Freight and Warehousing Association (Kifwa) has implemented a groundbreaking strategy to combat price undercutting and bolster revenue in the industry. Effective from December 1, 2023, Kifwa has established minimum service fees that are set to mitigate the impacts of inflation. While this move aims to provide cargo exporters and importers with financial security, it is important to note that minimum pricing often leads to increased costs for consumers, as it ensures higher incomes for service providers and producers alike.