By Ibrahim Khalif

 The Kenya Revenue Authority is the statutory body mandated with the collection of tax revenue on behalf of the Government.

Due to the pivotal role it plays in our economy, it is important that it carries out this mandate with efficiency and effectiveness as failure to do so would hamper its operations and affect many other players in the economy.

It is in recognition of its role in the economy that it made the decision to put in place a Taxpayer’s Charter that has been in operation for many years.  The charter sets out the rights and obligations of the taxpayers in addition to the service standards they should expect when dealing with the tax authority.

ISO certification

KRA also subscribes to International Standards where it received two ISO certifications.

KRA explained that the certification has elevated KRA to the elite group of global institutions that embrace best practices for business efficiency and quality service provision. However, charters and ISO certifications are not an end in themselves and mean nothing to the customers if they are not translated into action.

While I appreciate that there have been significant improvements in many facets of the organisation’s operation over the 18 or so years that it has been in operation, more still needs to be done in the following areas:

Records Management

One area of concern is that of records management and data capture. Misplaced tax returns filed with them are a perennial issue that often result in claims that they were never filed.

This is caused by lack of adherence to proper filing and records management systems that are in place. There are also issues of incorrect data capture that results in the tax information kept by the authority being different from what the taxpayer has.

Even though I have no data on how widespread the problem is, my many years’ experience as a tax practitioner points to existence of a problem in this area. 

Such challenges will reduce in future as taxpayers embrace e-filing of returns but the past records need to be cleaned so that they don’t continue to haunt the tax authority, tax practitioners and taxpayers alike.

Debt Management

Debt management is an integral component of a revenue authority’s operations. It is important that the data held on outstanding tax are accurate.

However, very often demand letters are sent without verification of the accuracy of the outstanding tax. Moreover, where there is tax recoverable, such information is only given on demand by the taxpayer or the tax practitioner handling the matter.

Requests to transfer tax recoverable from one year to another are met with demand of original receipts. This could be to safeguard against fraud but there should be flexibility in the event that the receipts have been misplaced.

RTGS payments

The introduction of value capping by Central Bank of Kenya (CBK) in October 2009 meant that the KRA no longer receive tax payments of Sh1 million and above which have to be paid directly into the relevant tax accounts at CBK through Real Time Gross Settlement System (RTGS).

This causes a challenge in the way income tax payments information is maintained with the tax authority. Taxpayer’s in most cases transfer the funds a day or two before the deadline after which the evidence of payment will be sent to the KRA for receipting.

 As the receipting is done after due date, the system will automatically compute late payment penalties and interest. KRA needs to find a lasting solution. One suggestion would be to link the KRA receipting system to CBK’s so that receipting is done in real time.

The verbal assurances by KRA that they will not demand penalties and interest arising under these circumstances are not sufficient.

Correspondence management

Taxpayers make all kinds of enquiries, elections and applications which requires the authority’s attention. Examples include responses to tax demands, request to correct errors, application for waiver of penalties and interest as well accounting year-end change.

The authority scores poorly in this area due to the long period it takes to deal with them. For instance, an application for waiver application can take upwards of 5 years to be determined and still denied after the long wait.

We are under new constitutional dispensation and taxpayers expect the authority to provide fair and effective administrative measures. The last thing one wants is taxpayers that constantly run to the courts to achieve this.

Ibrahim Khalif is a Senior Tax Manager, Deloitte East Africa

The views expressed in this article are those of the author and do not necessarily represent those of Deloitte East Africa.