Public Finance and Taxation CPA KASNEB Pdf notes

1. Introduction to Public Financial Management

• Nature and scope of public finance
• Sources of public finance
• Objectives of thePublic 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 PPD Act
• Procurement process 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 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
o Basis of charging tax in Kenya: Section 3 of the Income Tax Act
o Concept of residency and Criteria of taxing income in Kenya.
o Taxable and non-taxable persons
o Specified Sources of income
o Incomes exempted from taxation
• Taxation of Employment income
o Taxable cash and non-cash benefits/rewards received from employment
o Non-taxable cash and non-cash benefits/rewards received from employment
o Allowable deductions against employment income
o Tax credits (withholding tax, personal and insurance relief, others)
o Taxation of lumpsum payment for services rendered and services that would have been rendered; Gratuity, terminal dues, compensation for loss of office.
o Operations of PAYE systems: Preparation of PAYE returns, categories of employees, multiple sources of income, irregularly paid employees, casual workers, PAYE audit and triggers
o Other Statutory deductions (NSSF and NHIF)
o All these should be illustrated with relevant computations including PAYE computations
• Taxation of Business Income
o Introduction to taxation of business income including criteria of taxing business income
o Income Tax Act provisions on computation of business income
o Allowable and disallowable business expenses and taxable business income
o 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)
o Taxation of rental income and royalties
o Taxation of Farming income
o Taxation of Investment income (Dividend and interest income)
o Turnover tax and Minimal tax
o Taxation of Capital gains
o Taxation of Digital income; digital service tax and Digital service tax agents
o 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
All the above 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
All the above 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

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