Businesses that have been evading tax are in for a rude shock as Kenya Revenue Authority moves into premises, in a renewed effort to seal leaks, nab cheats and increase compliance.
This, as then government continues to squeeze taxpayers for more, with a number of new taxes and hikes in the current financial year, aimed at growing revenues to fund President William Ruto's Sh3.7 trillion budget.
KRA is expected to collect Sh2.57 trillion in ordinary revenues in the 2023/24 financial year.
This is after missing its last year’s target of Sh2. 27 trillion by about Sh107 billion, despite a growth in overall collections where it netted Sh2. 166 trillion.
In an aggressive move to increase compliance and catch up with evaders, the taxman is now going on a door-to-door mission, mainly targeting businesses with the use of its newly formed Revenue Service Assistants unit, that has paramilitary training.
It has deployed about 1,405 Revenue Service Assistants (RSAs) who graduated from the Recruits Training School in Eldoret in August, where they underwent a two-month training.
According to KRA, the RSAs programme’s mandate is to support taxpayers with their compliance needs.
The main aim of the programme is to facilitate online registration of trading businesses, verify taxpayers details, support compliance with the TIMS/eTIMS regulations, support compliance with excise regulations and data collection, Commissioner of Domestic Taxes, Rispah Simiyu, said in a notice yesterday.
“The RSAs will provide on-site facilitation to taxpayers, which will involve physical visits to taxpayer premises within the country,” she said, “KRA encourages the public to interact with the RSAs and let them know how they can assist you.”
The move now gives KRA a platform to catch up with businesses that are not tax compliant.
It also sets the ground for an onslaught on businesses and individuals involved in the wide fake excise stamps racket, that has been denying the taxman billions in potential revenues.
This is likely to catch up with unscrupulous manufacturers and dealers behind the fast-growing fake alcoholic and non-alcoholic beverages, and tobacco products market in the country, that has also exposed consumers to hazardous goods.
Areas around Nairobi’s Kariobangi light industries are among those marked as leading in counterfeit criminal activities, mainly dealing in fake alcoholic drinks.
Illegal home-based distilleries also remain wide-spread across the country.
While KRA has over time had its supplier improve security features on excise stamps, the Kenyan retail market remains flooded with fake excise stamps, which is fuelling growth of illicit trade, mainly on excisable goods.
Swiss company–SICPA has been the supplier of excise stamps, first introduced on alcoholic drinks and cigarettes in 2013.
A national survey by the Anti-Counterfeit Authority in 2019 revealed that the value of illicit trade in Kenya was at about Sh726 billion.
Overall, illicit trade denies the taxman more than Sh153 billion in potential revenue annually.
KRA is also leveraging on technology to support tax collection and ease compliance by both individuals and enterprises.
Among them is the electronic tax invoice management system.
According to KRA, TIMS allows for real-time validation and authentication of tax invoices.
During his budget speech in June, National Treasury CS Njuguna Ndungú also announced a plan to expand the tax base for more revenues to finance development.
This is amid a higher spending plan for the current financial year where the government is also battling a fast rising debt, which could slow down development as recurrent expenditure take a lion share of the collected taxes.
Kenya’s total debt stood at Sh10.2 trillion in June.
With limited revenues, the government has not option but to continue borrowing to meet its budget obligations, even as it piles pressure on KRA to collect more.
KRA is implementing reforms to move towards seamless taxation by ensuring that its systems, taxpayers and businesses are integrated, according to Treasury.
This is to allow for the automatic movement of data through machine to-machine based processes, and where appropriate, shift to real time processing.
“This will enable KRA to monitor business transactions in real-time therefore sealing revenue leakages through tax avoidance and evasion,” Njuguna said.
Government plans to scale up revenue collection efforts by the KRA to Sh4 trillion over the medium term.
“In order to achieve this, the government is undertaking a combination of both tax administrative measures and tax policy reforms,” CS Ndungú said.
KRA’s newly appointed Commissioner General Humphrey Mulongo recently said the authority will advance the use of technology in plugging revenue collection gaps and drive growth, in an ambitious plan to hit the Sh3 trillion target in the medium-term.
He said KRA will capitalise on big data analytics and artificial intelligence to drive revenue collection, while simplifying the tax regime.
