KRA eyes landlords to cut tax arrears

KRA Commissioner General John Njiraini. [File, Standard]

Kenya Revenue Authority has intensified its hunt for rental income tax as it seeks to reduce the cash owed by defaulters.

Taxpayers currently owe Sh50 billion in back taxes, penalties and interest payments.

This is almost enough to fund the health programmes recently suspended by the United States Agency for International Development worth Sh55.6 billion, meaning Kenya could do without the aid.

According to KRA, the figure is conservative as it is only from filed tax returns and excludes those who have not contacted the taxman.

Deputy Commissioner for Domestic Taxes James Ojee says KRA will be hard on landlords who have failed to take advantage of a recent tax amnesty and audit back taxes payable, which would drive the figure up significantly. The tax amnesty was valid from July 1, 2015 to June 30, 2016.

“If you go to our database, the debt portfolio is Sh50 billion but that includes principal, interest and penalties accumulated over time,” he said.

Kenyans who filed returns and have subsequently failed to do so are accumulating penalties of up to Sh20,000 or five per cent of the taxes, whichever is higher.

Landlords who fail to remit tax on rental income every 20th day of the month face a charge of 20 per cent on defaulted taxes as well as Sh20,000 each month.

Given that KRA only taxes landlords who earn at least Sh12,000 a month, or Sh144,000 a year, such penalties will be even higher than the total income for such landlords. “The problem is, some of the taxpayers are incurring penalties for so long even when they should file and get relief, which would put them below taxable returns,” said Mr Ojee.

KRA says its effort to intensify collection of rental income tax has increased revenue by about Sh10 billion since 2016.

“We have recruited 52,000 new landlords against our target of 100,000 and are collecting Sh400 million on average each month, or Sh4.8 billion a year,” said KRA Real Estate Manager Alice Kiptoo.

KRA has recruited 800 agents to withhold 10 per cent of landlords’ rents as a tool of netting more taxpayers.

Last year, KRA Commissioner General John Njiraini said the agency was in talks with Equity Bank and Safaricom to make it easy for landlords to pay tax.

“Equity Bank will help us broaden the rental income base by allowing landlords to pay taxes easily. We are developing a mobile application that will also make it easy for them to pay via M-Pesa,” he said.