How skewed KRA management structure is limiting effectiveness

Kenya Revenue Authority (KRA) was once an enviable institution. It had the most attractive and desired working environment in public service. It executed its core mandate of revenue collection effectively, and with integrity. Staff operated professionally in assessment of taxes. The institution embraced best management practices in tax administration. It earned a regional recognition as the leader in revenue collection.

KRA today is a pale shadow of itself. The days of glory are gone. Staff are demoralised as the institution sags under the weight of nepotism and cronyism. Staff misconduct and corruption have seized KRA and eroded its professionalism.

Diverted imported goods and dumped transit stuff have flooded the markets and paralysed local industry, usually with involvement of KRA staff. It is no longer a stickler to rules, and flouts its regulations and laws to execute public relations stunts. Incompetent managers have been placed in offices to the chagrin of competent ones who feel demotivated by the unprocedural actions.

For the six months to December 2015, KRA has announced it performed dismally by collecting Sh48 billion below its own target. There are concerns that by June 2016 year end, it could be off target by as much as Sh100 billion. This is in spite of the huge growth in imports which is a major revenue source, and a 5.8 per cent growth in the economy last year. Of the Sh48 billion shortfall, Sh16 billion relates to decrease in VAT on imports. KRA at Mombasa Port that is the main imports entry is rotten to the core. Last year, Parliament enacted new excise laws that brought in more taxes on cars, water, juices etc., in order to expand the tax base.

In recent years, KRA had invested billions of shillings in modernisation and ICT to boost its capability. For instance, it is installing a controversial $10 million Integrated Customs Management System to replace the Simba system. A new Cargo Management System, complete with cargo scanners and truck monitoring systems for transit goods were adopted. A modern iTax online system for filing tax returns was also installed.

But all these appear not to have helped. Nor has the emergence of 47 county governments catalysed enhanced collections in the regions as KRA fails to partner with the counties to position itself.

Incompetent management bedevils KRA. The Commissioner General who runs the outfit is probably the most listless leader the organisation has had since its inception. He was upgraded from the large taxpayers department to the office by the board under undue pressure. The renewal of his term too was not formally gazetted and it is unclear for how long he will continue to be at the helm.

The vesting of absolute powers under his office, away from the respective commissioners of VAT, income tax and other revenue resources significantly altered the management landscape in the organisation.

Commissioners no longer have the power to act independently and promptly on matters under their docket without his endorsement. Globally, the best practice is for the tax commissioners to decide on matters of taxes, which is a specialised role.

Treasury should weigh in on the board and rectify the institutional morass before it gets worse. It should also review the legal platforms and introduce amendments to give authority to tax commissioners. The threat of lifestyle audits and vetting of staff alone will not redeem the rot in this organisation without undertaking structural and top management changes.