You pay taxes, but do they reach KRA?

Your taxes can indeed be deducted but not necessarily remitted to the taxman.

In Summary

• On May 10, 2019, KRA interdicted seventy-five employees for various offences including collusion with businesspeople to evade taxes.

• is one thing to pay taxes and another to ensure that those taxes get to KRA before we can hold the Government to account.

Taxes
Taxes
Image: OZONE

In a letter to Jean-Baptiste Leroy on 13th November 1789, Benjamin Franklin wrote this phrase that has had meaning many centuries later:

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”

Everybody dies and taxes are inevitable - no matter how poor or remote a village you live you will pay taxes in one form or another.

If you do not earn enough to pay income taxes, you will most definitely find yourself consuming VATable goods.

The question very few of us ask is whether the taxes we pay actually end up with the taxman.

 

When the country was faced with what seemed to be runaway corruption, The President set up a Multi-Agency Taskforce Team on Corruption (MATT) comprising all the major players in the Justice, Law and Order sectors. These included EACC, ODPP, DCI, AG’s office, KRA, CBK, Asset Recovery Agency, NIS and Financial Reporting Centre.

The primary role of MATT was to enable close coordination among these agencies to ensure corruption cases are quickly investigated and culprits brought to book without entanglement in individual agency bureaucracies.

Corruption cases that would take ages to investigate and prosecute are now taking weeks to a few months and conviction rates have greatly improved.

One of the biggest beneficiaries of this cooperation has been KRA which has used it to go after tax evaders with remarkable success.

KRA has also achieved significant success in using this collaboration to go after corrupt staff. On May 10, 2019, KRA interdicted seventy-five employees for various offences including collusion with businesspeople to evade taxes.

Hitherto untouchable businesspeople have been hauled before courts to answer to charges of tax evasion.

Government agencies both at the National and County level who had not been remitting PAYE and VAT were issued with Agency Notices and their bosses hauled to KRA offices to negotiate payments plans.

Nairobi County Government for example paid KRA 3 Billion shillings between October and December last year.

University Vice-Chancellors were put to task over non-remittance of staff deductions and compliance teams sent to various private agencies.

Like most Kenyans, I often complained about the need to file tax returns for those whose sole source of income is salaries – until I joined a County Treasury and had to contend with a Sh4.9 billion KRA Demand Notice for unremitted PAYE and VAT deductions.

That is when it hit me – your taxes can indeed be deducted but not necessarily remitted to the taxman!

As it turns out, a lot of Government and private institutions are notorious for deducting P.A.Y.E and VAT but not remitting the same to the KRA.

Many people have found this the hard way whenever they have applied for Tax Compliance Certificates.

Most of us think of corruption after the National Treasury receives money, not before KRA collects it.

Having been in charge of revenue collection at the County, I can tell you there is a bigger potential for revenue collection than what we have now. It is refreshing to see that the new Commissioner General, working with MATT, has embarked on robust measures to disband corruption networks that have denied Kenyans Billions in tax revenue.

 

This also includes institutions that collect taxes but fail to remit. I do not think there is a worse corruption than to deduct someone’s hard-earned money use it for other purposes other than submitting it to the taxman.

You are not only involved in theft and fraud but you are also denying the State the necessary resources to provide essential services like Security, Health, Education and Infrastructure - services without which you will not be able to conduct that business in the first place.

A look at the KRA Performance Report for 2019/2020 illustrates how big a problem deducted but unremitted taxes is.

As a result of enhanced compliance and enforcement efforts, KRA was able to grow debt collections by 111% year on year from Sh40.256 Billion in 2018/2019 to Sh85.073 Billion in 2019/2020.

Out of this, PAYE recoveries alone was Sh33 Billion. Various institutions were “sitting” on more than Sh33 Billion deducted from ordinary workers without remitting the money to KRA!

To put this in perspective, Sh33 billion would have built and equipped FOUR of the ultra-modern 650-bed capacity KU Teaching and Referral Hospital.

Filing of tax returns has never been more important. It is one thing to pay taxes and another to ensure that those taxes get to KRA before we can hold the Government to account.

By filing your returns, you ensure that KRA can then follow up with your employer to ensure they are fully remitting those taxes to the authority.

Dr Makodingo Washington is a Devolution and Governance Expert