DRAFT RULES

Treasury push for new rules to bridge tax gap, catch defaulters

In Summary

• Treasury wants traders to record daily sales and provide ETR receipts to the taxman.

• Manufacturers say ETRs will help improve cash flow for as the system will expedited clearance of tax refunds.

Acting Treasury CS Ukur Yattani on November 15, 2018.
Acting Treasury CS Ukur Yattani on November 15, 2018.
Image: JACK OWUOR

Manufacturers have welcomed the move by Treasury to incorporate an Electronic Tax Register across all business operations.

Kenya Association of Manufacturers CEO Phyllis Wakiaga told the Star, if properly implemented, the use of ETRs in invoicing tax receipts would not only widen the current tax bracket but also increase revenue collection.

“With a widened tax bracket, the government doesn’t need to increase the existing tax rates to achieve its revenue targets,” she said.

 

This means Kenya’s business environment would be more conducive as the cost of doing business will not be impacted negatively due to increased tax rates.

Under the draft Value Added Tax (Electronic Tax Invoice) Regulations, 2019 Treasury wants traders to record daily sales and provide ETR receipts to the taxman.

This means all business owners will be required to incorporate an Electronic Tax Register into their operations if the proposal by Treasury is passed.

“The use of the ETRs in invoicing tax receipts will assist in improving tax compliance in the country, which will translate to higher tax revenue collection by the government,” Wakiaga said.

She said the use of ETRs will also help improve cash flow for manufacturers as the system will expedited clearance of tax refunds and validation of tax claims owed by government such as VAT.

This will in turn trigger high productivity in their supply and value chains.

The cash register type systems will be used to record sales and provide ETR receipts to KRA as well as store information on stocks and sales. 

 

The ETRs will transmit data in real time each time a transaction is made to KRA, featuring General Packet Radio Service (GPRS) to help the taxman track the location of each ETR device.

Currently individual companies are required by law to file their tax liabilities periodically with the Kenya Revenue Authority.

Wakiaga said Treasury needs to take into account small businesses whicch play a huge role in the country through job and wealth creation when implementing the ERT systems as the do not have similar financial ability in comparison to large companies.

“In order to promote their growth, the government needs to incorporate incentives such as offsetting the cost of acquiring the machines against other taxes,” she said.

The ETRs are also aimed at helping the taxman collect billions of shillings lost due to tax evasion.