TAX COLLECTION

Towards self-sufficiency through effective tax collection

Two recent initiatives by KRA are projected to go a long way in improving tax collection.

In Summary

•While tax disputes are inevitable, KRA is keen to improve resolution of the disputes as an additional tool of enhancing customer satisfaction.

•The Authority encourages concerned taxpayers to leverage on the Alternative Tax Dispute (ADR) framework. 

The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

When President Kenyatta took over the reigns of the country from former President Mwai Kibaki (himself a great reformer in tax collection) in March 2013, our ordinary revenue stood at Sh707 billion in the Financial year 2011/2012. Over the last nine financial years, ordinary tax revenue has grown 136% to now stand at 1.669 Trillion shillings in the financial year 2020/2021. What is even more encouraging is to note that at Ksh.1.669 trillion in FY 2020/21, KRA defied all odds and surpassed its target with a surplus of Ksh 16.8billion; representing a revenue growth of 3.9% compared with the previous Financial Year.

Even as the economy has continued to grow at an average of 5% of the last couple of years, KRA has become more innovative and aggressive in its collection of taxes. In fact, over the last couple of years, under the aegis of the Multi-Agency Team set up by the President, KRA has been able to increase tax collection by targeting tax evaders and institutions that have continuously failed to remit tax deducted, including government institutions. Coupled with simplification of tax filing under the iTax platform, the institution has made it easier for Kenyans to declare, pay and file their returns over the years.

Two recent initiatives by KRA are projected to go a long way in improving tax collection. The first one is the recently launched Voluntary Disclosure Program. This is a program where a taxpayer confidentially discloses tax liabilities that were previously undisclosed to the Commissioner for the purpose of being granted relief of penalties and interest of the tax disclosed.The disclosures eligible under this program will be undisclosed taxes that accrued in the 5 - year period from 1st July 2015 to 30th June 2020. Where the Commissioner is satisfied with the facts disclosed in the application, the taxpayer shall be granted a relief of the interest and penalty due on the tax disclosed and paid as follows: 100% remission where the disclosure is made and tax liability paid in the first year of the program; 50% remission where the disclosure is made and tax liability paid in the second year of the program and 25% remission where the disclosure is made and tax liability paid in the final year of the program. So far, over 393 taxpayers have applied for VDP with over Ksh 2 Billion being recovered by the Kenya Revenue Authority through this process.

The other is Alternative Tax Dispute Framework. While tax disputes are inevitable, KRA is keen to improve resolution of the disputes as an additional tool of enhancing customer satisfaction. The Authority encourages concerned taxpayers to leverage on the Alternative Tax Dispute (ADR) framework. ADR, whose outcome is a win-win for the parties involved, is not only an expeditious process but also one that does not dent relations. During the Financial Year 2020/2021, through the ADR process, KRA concluded 552 cases up from 284 cases from the previous year.

KRA has also enhanced trade facilitation in Kenya and across borders through; better technology, effective refunds management processes and multi-agency collaborations. The most recent breath of new life to trade facilitation in the country is the operationalization of the National Cargo De-consolidation Centre (NCDC) in Nairobi.The Centre, which serves small scale importers in the Small and Medium-size Enterprises (SMEs), has significantly reduced the clearance time of goods from two days to between one and two hours. Small-scale importers no longer have to camp at the Inland Container Depot (ICD) waiting to clear their goods.The NCDC is jointly ran by KRA and Kenya Railways Corporation (KRC). Small-scale importers have benefitted from NCDC through reduced last mile costs due to proximity. Between November 2020 when the facility was launched and August 2021, KRA had cleared over 1,021 containers and collected over Ksh.1 billion in taxes.

The commendable revenue performance is a reflection of the success of the strategic measures that the Government is implementing to enhance revenue collection. Expanding the tax base is key to bring our nation close to her destiny of a fair, just, inclusive and equitable nation as well as to fuel our nation’s quest to improve infrastructure, service delivery, and access to public goods. While the number of registered voters in Kenya stands at 19.6 million, the number of active individual taxpayers currently stands at about 6 million. KRA’s new corporate plan intends to aggressively enroll two million new taxpayers to take the number to slightly over 8 million by the end of the financial year 2023/2024. This should see a significant growth in ordinary tax revenue that will go along way in reducing our national deficit to manageable levelas and allow less reliance on loans to fund development and social welfare projects.

To achieve this, the National Government will continue working with KRA in formulating National Tax Policy and enhancing reforms in tax regulations in order to expand the tax base and raise tax compliance levels. In this regard, this year’s budget saw key amendments to the Income Tax Act, the Value Added Tax Act, the Tax Appeals Tribunal Act, Excise Duty Act, Tax Procedures Act and Kenya Revenue Act. 

The Digital Service Tax  sector is among industries that were earmarked in the Tax Base Expansion drive, since it is largely untapped. The Digital Service Tax is currently chargeable on services offered within the country by non-resident companies via the digital market place. About 58 non-resident companies have already registered for Digital Service Tax and are making self-declaration with a tax contribution of Ksh 47.5 million as at end of FY 2020/21.

As the President recently noted, KRA must continue to collaborate with other Agencies, within the multi-agency framework, to fight illicit trade and to ensure that no single cent of revenue is lost through tax evasion. As the war on graft intensifies under the Multi-Agency Team, we must continue to see less and less pilferage of taxpayer money through corrupt public officials and unscrupulous businessmen who cart away billions of shillings of our hard-earned taxes into their pockets and away from critical public services they are meant to fund.

In his speech at the National Taxpayers Day, the President encouraged Kenyans to participate in paying of taxes so as to realize the development we continue to yearn for. He noted that many Kenyans demand better infrastructure, public services, and access to public goods; but they are not willing to fund the same through registering and paying taxes. He concluded by urging Kenyans to pay their fair share of taxes because in doing so, “we take ownership of the governance of our nation and the actualization of our shared aspirations.”