By Macharia Kamau

The Kenya Revenue Authority  (KRA) is expected to up its ante in the hunt for the Sh90 billion income from landlords over the next six months.

This follows a directive by National Treasury Secretary Henry Rotich to speed up the process of building a database of landlords in the country.

The move is hoped to ensure all landlords pay tax on rental income and arrears.

The taxman has been unable to tax the new landlords, which has seen income from the sector reduce from Sh5 billion in 2009, to Sh1 billion last year despite phenomenal growth in the real estate.

multi-billion industry

The recent past has transformed the sector from a simple business into multi-billion industry. The move has seen the micro and small real estate firms grow into reputable medium sized enterprises

KRA has been making attempts over the last one year to have landlords conform with the income tax law including use of an innovation by one of its employees.  The push led to a court battle with the said employee and subsequent barring the Authority from using the technology to map out rental houses.

Such efforts have not yielded much. KRA had even considered letting small property owners off the hook, at least in the short-term as it figures the logistics of bringing them into the tax net, while going for the large property owners.

widen tax bracket

Treasury Cabinet Secretary Henry Rotich is however not having any of that . He on Thursday instructed KRA to have a system in place that would bring every landlord into the tax net by end of this year.

“Last year the Finance minister directed KRA to ensure all landlords earning rental incomes pay their due share of taxes to the exchequer... ,” he said while he delivered his budget statement in Parliament Thursday afternoon.

“I have once again directed KRA to leverage on technology, map out all rental property in urban areas and put in place a robust institutional framework for bringing all these landlords into our tax net by December, 2013.” Tax experts note that a robust technology based system would help taxman get revenue from many property owners that are currently not conforming with the income tax act.

“Last year, the then finance minister directed KRA to map out residential and commercial areas to bring on board non-compliant landlords to the tax net.  KRA now has to leverage on technology to complete the mapping exercise by December 2013,” said PWC in its post budget analysis.

“Once the mapping is completed, the taxman will be able to tax rental income previously untaxed due to administrative challenges in capturing this income. This will support the government’s intention to expand the tax base in order to enhance revenue collection.”

Richard Ndungu, a tax partner at KPMG noted that the move, if successful, would widen the tax base. “It is a good move got the country because the tax base will be widened.

The government will also benefit from the boom in the real estate sector that has been growing,” he said.

Last year, KRA got a similar directive from the then Finance Minister Njeru Githae. This had gotten one of the KRA employees’ creativity.

software controversy

The software named the Geo-spatial Revenue Collection Information System by Samson Ngengi however has not been of use to the taxman.

Mr Ngengi, who was fresh from college then and had just joined KRA as a management trainee, fell out with the employer over the use of the software.

Ngengi had argued that he should be adequately compensated for his efforts while KRA had argued that it does not trade with its employees.

He did not however manage to develop a software that detailed the different plots in Nairobi, their owners and their status as taxpayers.