OUTSTANDING REVENUE

KRA on the spot as tax default rises by Sh1 trillion in 12 months

Auditor General Nancy Gathungu says taxman's plan to recover debts not convincing

In Summary
  • Tax refunds have also grown exponentially to Sh106 billion from Sh85 billion last year.
  • Auditor also flags tax shortfall of Sh37 billion saying it means taxpayers missed crucial government services.
KRA Commissioner General James Mburu
KRA Commissioner General James Mburu
Image: Courtesy

Kenyans may have failed to pay tax to the tune of Sh1.04 trillion in one year. This pushed the amount of tax in default to Sh1.5 trillion as of June 30, 2020.

Auditor General Nancy Gathungu has cast doubt that Kenya Revenue Authority has put adequate measures in place to collect the outstanding revenue or reconcile the debts.

In her latest audit of the taxman for the period June 30, 2020, the auditor revealed the outstanding balance was Sh415 billion in the year 2019.

Gathungu warned that should the strategies implemented by the taxman fail to yield results, the outstanding balance will keep on increasing.

“My opinion is not modified in respect of this matter,” the Auditor General said in her report tabled in Parliament on November 18.

She said the Commissioner General Githii Mburu-led agency indicated that the exercise of validating the debt is ongoing and various strategies have been implemented with a view to reducing the debts.

KRA reported that it had enhanced recovery of debt revenue and undertaking taxpayer’s ledger corrections and reconciliations.

The taxman told auditors they have embarked on reversal of erroneous penalties and interests and processing of tax waiver applications.

KRA is also on a spot for failing to refund taxpayers excess payments which have risen to the tune of Sh106 billion as of June 30, 2020.

The amount was Sh20 billion more compared with the year to June 30, 2019 when the refunds claims were at Sh86 billion.

“Should the authority fail to get enhanced funding from the National Treasury for payment of approved claims, the refund claims will keep on escalating as indicated,” Gathungu said.

Management had indicated that various measures, including reorganisation and additional staffing of the refunds unit, were in place to help hasten the repayment process.

KRA also said it had put measures for timely resolution of system challenges and that it was seeking for enhanced funding from the National Treasury for payment of approved claims.

Gathungu has also raised concerns that Kenyans may have not received services from the public service following a tax collection shortfall of Sh37 billion in the year under review.

KRA as of June 2020 had collected Sh1.609 trillion out of the targeted Sh1.646 trillion resulting in the shortfall of Sh37.3 billion.

The auditor said the under collection of the budget translated into equivalent services budgeted for but not delivered to the public.

“There is, therefore, the need for the management to re-look at its revenue collection mechanism with a view to ensuring that revenue collection strategies are enhanced to close up the shortfall,” Gathungu said.

KRA in October said it’d continue to drive compliance through investment in modern technology to enhance efficiency in tax mobilisation.

The agency said it will also intensify its fight against tax evasion to ensure no revenue is lost as way to posting positive performance as seen in the first quarter of the financial year.

The taxman, during the period, collected Sh476 billion, surpassing its target for July to September by Sh15 billion.