Public Finance & Taxation for CPA Intermediate Level

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Public Finance & Taxation Notes

Course Syllabus

1. Introduction to Public Financial Management
   • Nature and scope of public finance
   • Sources of public finance
   • Objectives of the Public Financial Management Act and Financial regulations
   • Budget process for national, county and public entities, Development plan preparation, Treasury circulars, Cash flow projections, Budget estimates and revenue raising measures.
   • Role of the National Treasury and County Treasuries with respect to the management and control of public finance.
2. Relationship between National and County Governments on budget and economic matters
   • The process of sharing revenue between national and county governments and among the county governments: Factors considered and formula used
   • Division of revenue bill and county allocation of revenue bill
   • The role of the Commission on Revenue on Allocation (COR)
   • The role of the Council of Governors in county financial management
   • National Government public funds: The Consolidated Fund; The Contingency fund; The Equalisation fund and Other National Government public funds
   • County Government public funds; County Revenue Fund; County Government Emergency Funds and other county public funds
   • County government revenue sources.
3. Oversight Function in Public Finance Management
   • The role of National Assembly: Responsibilities of the National Assembly budget committee in public finance matters
   • The role of Senate: Responsibilities of the Senate budget committee in public finance matters
   • The role of Parliamentary Budget Office
   • The role of Auditor General
   • The role of Internal Audit
   • Role of Controller of Budget
   • The role of public sector accounting standards board
4. Procurement in public entities
   • Introduction to Public Procurement and Disposal (PPD) Act
   • Procurement guidelines as envisaged by PPD Act
   • Procurement process by National, County and other public entities: The role of the National Treasury, Public Procurement Regulatory Authority and Public Procurement Administrative Review Board
   • Tendering process and selection of suppliers in public sector
   • Concept of e-procurement
5. Public Private Partnerships Arrangements
   • Rationale and justification for Public Private Partnerships
   • Establishment of Public Private Partnerships (PPP) Unit in the National Treasury
   • Contract/project agreements, guidelines and standards
   • Composition and role of PPP petition committee
   • Establishment and role of PPP project facilitation fund
6. Public Debt Management
   • Establishment of debt management office
   • Objectives of debt management in public sector
   • Sources of public debt in Kenya
   • Management of debts by county governments and other public entities
   • Role of the Cabinet Secretary of the National Treasury in public debt management
   • Measures that can be adopted to reduce public debt
7. Introduction to Taxation
   • Definition of Tax, Taxation and Types of taxes in Kenya
   • History of taxation
   • Classification of taxes; Tax shifting and Factors that determine tax shifting
   • Principles of an optimal tax system
   • Types of tax systems; Single versus multiple tax systems
   • Purposes of taxation/Why the government levy taxes
   • Tax evasion and tax avoidance
   • Taxable capacity
   • Budgetary and Fiscal policies
   • The Revenue Authority; Structure, Functions, Large and Medium Taxpayers Office mandate
8. Taxation of Income
   • Introduction
     • Basis of charging tax in Kenya: Section 3 of the Income Tax Act
     • Concept of residency and Criteria of taxing income in Kenya.
     • Taxable and non-taxable persons
     • Specified Sources of income
     • Incomes exempted from taxation
   • Taxation of Employment income
     • Taxable cash and non-cash benefits/rewards received from employment
     • Non-taxable cash and non-cash benefits/rewards received from employment
     • Allowable deductions against employment income
     • Tax credits (withholding tax, personal and insurance relief, others)
     • Taxation of lumpsum payment for services rendered and services that would have been rendered; Gratuity, terminal dues, compensation for loss of office.
     • Operations of PAYE systems: Preparation of PAYE returns, categories of employees, multiple sources of income, irregularly paid employees, casual workers, PAYE audit and triggers
     • Other Statutory deductions (NSSF and NHIF)
     • All these should be illustrated with relevant computations including PAYE computations
   • Taxation of Business Income
     • Introduction to taxation of business income including criteria of taxing business income
     • Income Tax Act provisions on computation of business income
     • Allowable and disallowable business expenses and taxable business income
     • Taxable business income and tax payable computations in respect of:
       • Sole proprietorship
       • Partnerships (excluding admissions, retirement of partners and conversions)
       • Incorporated entities (excluding specialised institutions)
   • Taxation of rental income and royalties
   • Taxation of Farming income
   • Taxation of Investment income (Dividend and interest income)
   • Turnover tax and Minimal tax
   • Taxation of Capital gains
   • Taxation of Digital income; digital service tax and Digital service tax agents
   • Withholding Tax
     • Income subject to withholding tax (Dividends, Interest, management and profession fees, royalties)
     • Withholding Tax Rates on Residents and non-residents
     • Introduction to Double Tax Agreements and the impact on withholding tax payments (should be illustrated with relevant basic computations).
9. Investment Allowances/deductions
   • Introduction to capital allowances and Rationale for capital deductions
   • Types of capital allowances; Theory and computations
   • Investment deductions; Ordinary manufacturers
   • Industrial building deductions
   • Wear and tear allowances
   • Farm works deductions
   • Shipping investment deduction
   • Other deductions (should be illustrated with relevant computations)
10. Administration of Income Tax and Tax Procedures
    • Registration and deregistration of tax payers
    • Personal identification number: Issue, uses, cancellation of a PIN
    • Taxpayer's tax representative: Appointment, liabilities and obligations
    • Tax Returns and Assessments: Self-assessment, Default assessment, Advance assessment, Amendment of assessments
    • Collection, recovery and refund of taxes
    • Tax Decisions, Objections, Appeals and Relief of mistakes
    • Voluntary Tax Disclosure Program
    • Administrative penalties and offences
    • Application of ICT in taxation: Practical use of iTax to file the returns
11. Administration of Value Added Tax (VAT)
    • Introduction to VAT, Basis of charging VAT and VAT rates
    • Rights and obligations of VAT taxable person
    • Registration and deregistration of businesses for VAT
    • Key terms in VAT: Input tax, Output tax, Supply, Time of supply/Tax point and Taxable value of a supply/Value for VAT supported with relevant calculations
    • Deduction of input tax
    • Accounting for VAT and VAT records
    • Taxable and non-taxable supplies: Zero rated supplies, Exempt goods and exempt services including restriction of input tax claim.
    • Privileged persons and institutions
    • Withholding VAT and withholding VAT agents
    • VAT returns and assessments including VAT Auto Assessments
    • Remission, rebate and refund of VAT
    • Changes to be notified to the commissioner
    • Offences, fines, penalties and interest
12. Customs Taxes and Excise Taxes
    • Purpose of customs and excise duties
    • Imposition of customs duty
    • Customs procedure
    • Bonded warehouse and bond securities
    • Goods subject to customs control
    • Refund of duty
    • The Simba System/Integrated Customs Management System
    • Imposition of excise duty
    • Excisable goods under excise control
    • Application for excise duty (licensing), issue of licences, Suspension and Cancellation of Licences
    • Excise stamps and Excisable goods management system
    • Refund of excise duty
    • Excise duty returns and payments
    • Offences and penalties
13. Miscellaneous fees and levies
    • Export levy
    • Import Declaration fee (IDF)
    • Railway Development Levy (RDL)
    • Stamp duty
    • Catering levy
    • Motor vehicle advance tax
    • Betting, Lotteries & Gaming taxes

Sample reading and reference material

1. NCLR (2009). Laws of Kenya: East African Community Customs Management Act, 2004.
2. NCLR (2017). Laws of Kenya: Excise Duty Act No. 23 Of 2015
3. NCLR (2018). Laws of Kenya: Income Tax Act
4. NCLR (2012). Laws of Kenya: The Public Finance Management Act
5. NCLR (2018). Laws of Kenya: Tax Procedures Act of 2015
6. NCLR (2018). Laws of Kenya: Value Added Tax Act of 2013
7. KASNEB e-learning resources (link on the KASNEB website).
8. KASNEB approved study packs.
9. Sample text books by local authors