Public Finance and Taxation Notes

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CPA INTERMEDIATE LEVEL NOTES

FINANCE AND TAXATION UNIT DESCRIPTION

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply public financial management principles, implement public financial management regulations at middle management levels and to prepare non-complex tax computations for individuals and corporates.

FINANCE AND TAXATION LEARNING OUTCOMES

A candidate who passes this paper should be able to:
• Apply public financial management requirements in practice in non-complex environments in both the public and private sectors
• Compute taxes for various individuals and entities
• Apply the written taxation laws in addressing various tax issues
• File tax returns
• Undertake non-complex tax reviews.

CONTENT

Introduction to public financial management

• Nature and scope of public finance
• General overview of public financial management as envisaged by the Constitution
• Role of the national and county treasuries
• Overview of the Public Financial Management Act
• Financial regulations
• Treasury circulars; meaning and application
• Process of developing national and county government finance bills
• Role of budget officers in budget preparation and execution
• Responsibilities of the national and county treasuries in relation to budget preparation
• Budget process for both national, county and public entities

Establishment of public funds in the public sector

• Provision of establishing public funds
• Rationale of creation of public funds
• The Consolidated Fund
• The establishment and administration of contingency funds
• The establishment and administration of equalisation funds
• County revenue sources

Supply chain management in public entities

• Definitions and terminologies
• General overview of Public Procurement and Disposal (PPD) Act
• Procurement guidelines as envisaged by PPD Act
• Committees responsible for procurement
• Procurement process by National, County and other public entities
• Tendering process and selection of suppliers in public sector
• Concept of e-procurement

Oversight function in public finance management

• The role of National Assembly
• The role of Senate
• The role of County Assembly
• The role of Auditor General
• The role of Internal Audit
• Role of Controller of Budget in relation to disbursement of public funds as envisaged by the Constitution and PFM Act, 2012

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Introduction to taxation

• History of taxation
• Types of taxation
• Principles of an optimal tax system
• Single versus multiple tax systems
• Classification of tax systems
• Tax shifting
• Factors that determine tax shifting
• Tax evasion and tax avoidance
• Taxable capacity
• Fiscal policies
• The Revenue Authority; history, structure and mandate

Taxation of income of persons

• Taxable and non-taxable persons
• Sources of taxable incomes
• Employment income:
• Taxable and non-taxable benefits
• Allowable and non-allowable deductions
• Tax credits (withholding tax, personal and insurance relief, others)
•  Incomes from past employment
• Business income:
• Sole proprietorship
• Partnerships (excluding conversions)
• Incorporated entities (excluding specialised institutions)
• Turnover tax
• Income from use of property- rent and royalties
• Farming income
• Investment income
• Miscellaneous taxes and other revenues
• Stamp duty
• Catering levy
• Motor vehicle advance tax
• Capital gains tax

Capital deductions

• Rationale for capital deductions
• Investment deductions: ordinary manufacturers
• Industrial building deductions
• Wear and tear allowances
• Farm works deductions
• Shipping investment deduction
• Other deductions

 Administration of income tax

• Registration and deregistration of tax payers
• Assessments and returns
• Operations of PAYE systems: Preparation of PAYE returns, categories of employees
• Statutory deductions (NSSF and NHIF)
• Notices, objections, appeals and relief for mistakes
• Tax decisions; objections and appeals
• Collection, recovery and refund of taxes
• Administrative penalties and offences
• Application of ICT in taxation: iTax

Customs taxes and excise taxes

• Customs procedure
• Import and export duties
• Prohibitions and restriction measures
• Transit goods and bond securities
• Purposes of customs and excise duties
• Goods subject to customs control
• Import declaration form, pre-shipment inspection, clean report of findings
• Excisable goods and services
• Application for excise duty (licensing)
• Use of excise stamps
• Offences and penalties
• Excisable goods management system

Emerging issues and trends

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