Public Finance and Taxation kasneb new syllabus notes



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.


      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.


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.
  1. 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
  1. 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
  1. 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

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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