KRA to tighten noose for directors of tax evasive firms

Days of directors whose companies evade tax and then resurface under new trading names could be numbered.

The Kenya Revenue Authority (KRA) wants to make it hard for directors of such companies to be allowed to open new businesses and issued with new PINs before settling pending tax liabilities.

KRA Chief Manager for Domestic Taxes Department Judith Njagi said the taxman is upping its game to narrow down to directors of companies whose PINs have been suspended for tax non-compliance.

“We are enhancing systems so that we will be able to know directors of companies whose PINs we suspended and have not come forward. Before we give them any other PIN, we need to first of all close the pending taxes,” said Ms Njagi.

For individuals, KRA issues them with one PIN to be used for their entire life. However, one person can open as many businesses as they can and issued with PINs for each of them since firms are viewed as separate entities.

In February this year, KRA deactivated about 95,000 PINs. Ms Njagi says most of them were those of businesses doing business with government yet they are not paying taxes.

With filing of tax returns having migrated to online platform called iTax, one can no longer file returns manually.

The iTax system is linked with Integrated Financial Management Information System (IFMIS) and other government institutions, making it possible for KRA to see those supplying goods and services to the government.

“We found so many suppliers to the Government who are not tax compliant. Some have not even registered their PINs on iTax. Any PIN that is not on iTax is considered invalid,” explained Njagi.

“We have realised that there is an abuse. There are people opening companies to defraud. This is under investigation.”

To make it hard for tax cheats to continue trading with government, KRA wants directors of companies whose PINs were suspended to come forward and clear tax liabilities facing their businesses.

Some directors with companies having tax disputes with KRA have been opening new companies and then continuing to trade. However, KRA now wants to go after such directors or those who have never bothered to pay the pending taxes.

Missing the targets

In law, there is withholding income tax mostly on rent as well as professional and management services. For instance, if a business has rented out space to a government institution, it is supposed to be paid the full amount in rental income and then pay out 10 per cent withholding tax to KRA.

But this has proved problematic with many not remitting. Ms Njagi says KRA may opt to go for government institutions that continue doing business with such firms. “If we don’t get the person who should have paid the tax, we will go to the same government institutions to pay us the money or give details of the person,” said Ms Njagi.

KRA has been facing increased pressure to collect more taxes each financial year since National Treasury keeps setting higher targets. But KRA has ended up missing the targets.

In the current 2017/2018 financial year, Treasury had given KRA a target of Sh1.499 trillion. Between July and December 2017, the taxman had collected Sh656.9 billion.

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