False msafiri BUSINESS 120 and African giants like Kenya Breweries, Nandos and Pick and Pay) started off as small companies and then grew. Read the biographies of the great entrepreneurs – the Fords, the Gateses, the Motsepes, the Mitals, the Ibrus and the Dangotes – and you will discover that great businesspeople come from all backgrounds. Some are well- educated, others can barely read; some come from sound families, others had to struggle on their own; some are strong and charismatic, others are shy and retiring. Yet they have all succeeded as businesspeople. Business is truly a great equaliser. It is open to all – male and female, young and old. Success in business means not only a good income, it often also brings social respect and admiration, leadership and power. You can live your dreams and help others achieve theirs. How to get started If you have read this article so far, it suggests that you are interested in going into business. You may not be too sure about it, you may think ‘ lets wait and see’ but you are nibbling. That’s a good sign! First comes the desire, then the means of achieving that desire. You might well be wondering, ‘ How do I get started?’ or ‘ What is the best business to be involved in?’ or ‘ What are the risks?’ I put these questions to my business guru, and oldest friend. Although he was a very bright student, he left high school at 18 to go into business. He had no money to start with and little experience. He made his first million dollars from his base in Mombasa when he was 23 years old. He then went on to make and lose fortunes all over the world. Today, he is a wealthy man who dabbles a bit in business and spends his time ‘ travelling and seeking out interesting people’ when he is not playing with his grandchildren. If you want to go into business, how and where do your start? It doesn’t matter what business you go into, where your business is situated or at what age you go into business, there is only one place to start from. And that place is? Your head. In your mind. That is where it all starts. If you want to dip your toe in the water to feel the temperature; if you say ‘ I’ll give it a try’ or ‘ I’ll leave if I don’t like it’, then I will tell you to forget business. Continue doing what you are doing. If you want to go into business, you have to jump off the cliff. You have to commit totally. But before you jump, find out how far down the water is and make sure you can swim. The first day wealth of nations is in direct proportion to how many small businesses they have

False Q Philip Muema is a Tax Partner responsible for Kenya. For further information contact him on pmuema@ kpmg. co. ke Tel: + 254– 20- 2806221 KPMG Kenya is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. With 94,000 people worldwide, member firms provide audit, tax and advisory services from 717 cities in 148 countries. The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG BUDGET MATTERS Commentary on the East African Community 2008/ 09 budget promotion 121 msafiri I n keeping with tradition, 12 June 2008 marked another day when finance ministers from the East African Community ( EAC) simultaneously presented their 2008/ 09 budget proposals to their respective parliaments. These were presented against an impressive economic performance in 2007/ 08, with telecommunications, tourism and manufacturing sectors being the main drivers of the over 7% Gross Domestic Product growth. Unlike previous budgets, the 2008/ 09 proposals have a marked shift in the financing strategy and the EAC countries have opted to rely more on internal sources of finance as opposed to external financing comprised mainly of grants and foreign aid. Reliance on internally- generated revenue has provided food for thought to the finance technocrats as they seek to expand the tax base in order to collect much needed taxes, while soaring global petroleum and food prices have not made this task any easier. Taxation proposals Some taxation proposals were uniform across the board, especially those relating to customs duties. For example, customs duty on data processing machines was scrapped. There was also a move to remove duties on agricultural implements with the aim of ensuring food security for the region. There were also the usual culprits that suffer increases in excise duties year in year out – perhaps due to the fact that increases in taxes on such goods as beer and cigarettes does little in the way of decreasing demand and consumption. Little wonder why boozers are the greatest losers! There was a much anticipated equalization of the VAT rates within the EAC but this did not come to pass. As it is now, Kenya still enjoys the lowest VAT rate at 16% compared to 18% and 20% for Uganda and Tanzania respectively. Tanzania may perhaps be credited with the most innovative amendment that has been removed. In addition, rice and wheat has been zero- rated for VAT purposes and one hopes that these tax breaks will benefit the common man. The Government of Kenya also introduced a raft of changes in the financial services sector, including increasing the minimum core capital of banks and giving the Capital Markets Authority the necessary teeth – much like the Securities and Exchange Commission of the US – to carry out its capital markets policing mandate effectively. While the impressive growth of the telecommunications sector has attracted increased excise duties in Tanzania, satellite and wireless telephony has now been brought into the tax net in Kenya. The proposals in Tanzania and Kenya on VAT on exported services bear ambiguities, perhaps by sheer coincidence, on the applicable VAT rates and what exactly constitutes an exported service. While we are likely to see notices correcting these ambiguities, this may be the watershed for detailed place of supply rules for services in order to put this debate to rest, once and for all. The South African Revenue Service place of supply rules would be a good place to start for the Kenya and Tanzania Revenue Authorities. introduced the alternative minimum tax ( AMT); businesses that register losses for three consecutive years are now required to pay to the exchequer AMT. Much to the joy of most employees, the personal tax bands in Tanzania have been widened resulting in savings of up to 21% on the employees’ tax bill. This was a bold move given the need for greater revenues, and indeed Tanzania was the only country in the EAC to do so. The highlight of Uganda’s budget speech was the proposal to conclude and ratify double tax agreements with six countries. Once these proposals are adopted, Uganda will enjoy the most extensive tax treaty network within the EAC, something Kenya and Tanzania may need to consider emulating. Other noteworthy proposals included significant expenditure allocation to infrastructure development and tax exemption incentives for agro- processing industries outside Kampala. In addition, with petroleum production expected to start next year, petroleum production companies will now bear taxes on imports as the Government concessions on imports has come to an end. In Kenya, interesting developments include the flotation of sovereign bonds to finance the budget deficit. This will be a litmus test for the economic faith that both local and foreign investors have in the Government and is possibly the precursor to infrastructure and municipal bonds. In response to the sharp rise in the cost of living as a result of skyrocketing oil and food prices, import duty on wheat has been reduced while that on maize