Greetings and welcome to the second Money Weekly Roundup of 2024! 

This week, the Cabinet approved the implementation of the Treasury Single Account that paves the way for the consolidation of government cash resources scattered across different bank accounts under names of various agencies and ministries.

This is coming at a time when the government is keen on sealing revenue leakages and widening the tax base via the implementation of electronic tax invoicing system (eTIMS) that will give the taxman a near real-time feed of the daily transactions of businesses. A single government paybill number is already in place.

As always, we’ve included some of our favourite finance tips to help you get financially started this new year in our finance tips section below.

Let’s dive in!

What happened this week

🧾 After eTIMS Uproar, KRA Builds New Tax System for Small Businesses

After uproar over the cost of compliance with eTIMS regulations and technology adoption gaps, the Kenya Revenue Authority (KRA) is developing a separate system to accommodate small businesses.

The e-tax system that is key in helping KRA hit its revenue targets has been shunned by most with only 1% of registered businesses having onboarded by the January 1, deadline. KRA has since extended the deadline to March 31, 2024. 

Here are few things to know:

• e-Tims (Electronic Tax Invoice Management System): a software solution that links all business invoices directly to KRA. It aims to prevent under-declaration of sales and overstatement of expenses.

• Who should use eTIMS? All persons engaged in business. For any person to claim their business expense, the expense must be supported by an electronic tax invoice - whether registered for VAT or not (non-VAT taxpayers). It is mandatory for input tax and refund processing. 

• Deadlines: Initial deadline for the requirement for VAT-registered taxpayers to only accept electronic tax invoices had been set for June 1, 2023. This was extended to January 1, 2024 and now March 31. 

• Taxpayer Benefits: Simplified VAT return filing through eTIMS and easier VAT refunds through real-time communication with KRA.

• Taxman Benefits: Increased filing due to real-time invoicing, improved accuracy and reduced invoice discrepancies. e-TIMS implementation has revealed Nil and non-filers, indicating concealed transactions by some taxpayers.

• Consequences for non-compliance: Hefty fines proposed for traders not issuing electronic tax invoices. Non-compliance will also result in withholding of tax compliance certificates, VAT refund processing, and input tax claims. Failure to support business claims will also inflate a business’ tax obligations since KRA will not accept expense invoices not captured on eTims.

• Exemption for small businesses: Small businesses will not be required to generate electronic invoices. Instead, they will only need to show a record of transactions. This system is under development. Read More.

• Exemption threshold: KRA will set a qualification threshold, potentially aligning it with businesses subject to turnover tax (annual sales between Ksh1 million and Ksh25 million).

• Performance: In the first quarter of the 2023/24 financial year, VAT on local products increased by 21.1% missing the target by Ksh3.4 billion. VAT on imports grew by 11.7% to Ksh77.2 billion in the same period.

Compliance Status: As of January 1, 2024, only 6,000 out of over 663,000 registered businesses had onboarded. KRA estimates over six million potential businesses unregistered in the informal sector. Read More.

🏦 Cabinet Approves Merger of Government Bank Accounts

The Cabinet has approved the implementation of the Treasury Single Account (TSA) for national and county finances to improve public finance management. A TSA account is a single account or a set of interlinked bank accounts managed by the government under the National Treasury. The government has made this move for two main reasons:

• Simplifying government banking by minimising fragmentation of government accounts in commercial banks.

• Increasing government cash management transparency through creating visibility of government cash resources. Read More.

📉 Kenya's Eurobond Woes Continue

Kenya's failure to honour a promised $300 million buyback has heightened risks for its $2 billion Eurobond - that is maturing in June this year - causing yields to surge by 200 basis points. The absolute yield rate on the $2 billion bond maturing in June is now 16%, up from a 15-month low of 13%. 

Nevertheless, the National Treasury says it is on course to complete the buyback before March 2024, awaiting external inflows and exploring bond options. Analysts attribute Kenya's challenges, in part, to Ethiopia's recent default. Read More.

🌾 Ksh10 Billion in Low-cost Loans to Farmers

The government plans to allocate Ksh10 billion to offer low-cost loans to farmers through the Agricultural Finance Corporation (AFC), aiming to boost crop and livestock production. 

The funds will be provided at below-market interest rates to address the financial constraints faced by farmers, contributing the largest share to Kenya's GDP. The initiative, announced by Agriculture Principal Secretary Paul Ronoh, is part of a broader effort to enhance access to affordable financing for agriculture.

🤝 Absa Kenya, Safaricom Among Top Employers in Africa

Absa Kenya and Safaricom PLC are among 14 companies in Kenya ranked as top employers of Choice in Africa 2024 in a report by the Top Employers Institute (TEI) Programme. Other include:

• Bayer East Africa Ltd

• British American Tobacco

• Coca-Cola Africa (Pty) Ltd

• DHL Global Forwarding Kenya

• NVS Kenya Limited

• TransUnion Kenya

• AstraZeneca Pharmaceuticals Ltd

• Becton Dickinson East Africa Ltd

• Bureau Veritas

• DHL Express Kenya

• Huawei Technologies (Kenya) Company Limited

• Unilever Kenya LTD

Want more details? Check our full weekly update here:

This week’s finance tips

Welcome to Money254's Money Tips! Here, we share quick and easy tips that make understanding and managing your money a breeze. We break down the tricky parts of your finances and the financial landscape, making it simple and clear for you. Stay tuned for helpful tips every week.

Money254 MoneyTok of the week:

While short-term loans might seem helpful when you're in a money pinch, they can hurt your overall finances. It's important to find ways to manage without relying on them. This week’s video shows you some steps to break free from short-term loans and say goodbye to debt worries.

@money254hq

Medical situations, delayed paychecks, and The needs might all cause you to take out short-term loans. Is getting into debt, however, the ... See more

That’s a wrap for this week’s Money Weekly!

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Eric and the Money254 editorial team.