The Kenya Revenue Authority (KRA) has announced plans to deploy advanced technologies, train more tax and customs professionals as it seeks to lessen sophisticated tax evasion tactics by the rich and dodgy corporates.
The announcement comes barely days after Treasury Cabinet Secretary Ukur Yatani in his 2021/22 fiscal budget armed the taxman with new responsibilities to help it get difficult taxpayers to pay their fair share of taxes.
In the Finance Bill 2021 and the proposed National Tax Policy Framework, Mr Yatani wants to empower the Kenya Revenue Authority (KRA) to seek help from other authorities for tax collection and tax legislation.
One of the immediate targets of the above-mentioned will be to deal with the headache of collecting the controversial Digital Service Tax – an avenue believed to be used by companies running online services to obscure the taxman.
“I have initiated a process of developing a National Tax Policy Framework that will not only enhance administrative efficiency of the tax system but provide consistency and certainty in tax legislation and management of tax expenditure,” said Yatani in his budget speech last Thursday.
Adding that, a draft National Tax Policy is now ready and with plans afoot to share the document with stakeholders and allow for public participation before it is presented to the Parliament for debate and possible approval.
KRA randomly audits returns in an effort to catch tax cheats and measure evasion – but such reviews turn up very little evidence of evasion among the extremely wealthy, in part because the rich and certain companies use highly advanced accounting techniques to dodge the taxman nets.
In some instances, multinationals use offshore tax shelters and pass-through businesses as a means to avoid paying taxes, with ever-evolving technology also proving to be a contest for the authority.
A pass-through business is a sole proprietorship, partnership, or a corporation that is not subject to the corporate income tax – instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates.
As a result, M&C a department at KRA, in has advanced talks with Kenya Institute of Curriculum Development (KICD) to develop a syllabus, personalized on tax education whose expectation is to introduce the program into the country’s education system.
“Those talks are on course, and besides plans to modernize our systems, we believe tax programs should be incorporated in our education system as early as in Grade 4 all through to our secondary schools. This will complement our already existing training programs centered on tax and customs administration, fiscal policy and management,” said Commissioner and Head of KESRA Dr. Fred Mugambi in an exclusive interview.
Further, Dr. Mugambi says that such initiatives would help improve the technical expertise of tax experts at Times Tower as the country embarks on the implementation of newly proposed taxes including Digital Service Tax (DST) Minimum Tax as well as other tax base expansion such as the Voluntary Tax Disclosure Programme.
At the beginning of the year, the Authority introduced a host of tax compliance and revenue enhancement initiatives whose outcome saw the agency surpass its revenue target in successive months despite the slow economic progression brought about by the Covid-19 pandemic.
KRA in April for instance, collected Sh6.5 billion more, a 23.9 percent increase. This was a revenue performance of Sh176.7 billion against a set target of 170.2 billion. This compares to Sh144.1 billion collected in the same period in 2020.
In March 2021, the agency collected Sh144.6 billion.
The taxman missed its target by Sh350 billion last year, the highest in five years that saw the government net Sh1.43 trillion in taxes in the last financial year against an initial target of Sh1.8 trillion the National Treasury had set for it.
The low collection period was attributed to underperformance in value added taxes (domestic and imports), Pay As You Earn (PAYE) excise duty, ministerial A-I-A and import duty.
However, Mr Yatani estimates that the total revenue including appropriations-in-Aid and grants for the FY 2021/22 budget will hit Sh 2.1 trillion, equivalent to 17.0 percent of GDP.
Of this, CS Yatani is hopeful that total revenue would grow to Sh2.04 trillion, equivalent to 16.4 percent of GDP, an increase in nominal terms from Sh1.84 trillion in the FY 2020/21. Ordinary revenue in the budget is projected at Sh1.78 trillion, equivalent to 14.3 percent of GDP.
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