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Tax authority banks on boda boda operators, SMEs for more revenue

BUSINESS NEWS
By Moses Michira | October 6th 2015
KRA Commissioner General John Njiraini

Boda bodas and informal businesses are the next frontier target for the Kenyan Revenue Authority in a new push to net 4.4 million new taxpayers within three years.

Also top on the taxman’s agenda is a target to raise Sh5.3 trillion in next three years, a feat that requires the authority to consciously plug any revenue leakages.

“The task at hand though ambitious is achievable. Indeed, the board has set measurable targets under a three year blueprint dubbed KRA Vision 2018 which consists of 12 specific and measurable performance indicators,” explained KRA chairman Marsden Madoka.

This reorganisation of the tax agency, he says, will enable the Government achieve revenue independence and thereby eliminate reliance on deficit financing.

“To meet the ‘no deficits’ target by 2018, requires a minimum annual revenue collection of Sh2.050 trillion by 2017/18, requiring growth to play at an average of 20.8 per cent over 2013/14 - 2017/18 compared to 14.7 per cent over 2002/03 - 2013/14.”

This ambitious revenue goals, he says, can only be achieved by KRA becoming the single revenue collector – collecting all revenue and levies for the various government levels including county governments and by applying marketing approach to tax collection.

“We acknowledge that time is now ripe to accelerate the transformation of the organisation to meet emerging national tax administration and related needs.”

He said KRA hopes to achieve the revenue targets through a revamped enforcement strategy, applying innovative approaches to enhance collection in sectors with low tax compliance and scaling up taxation of the SME sector.

The proposed changes could significantly broaden the country’s tax base by ensuring a majority of the working population contribute to national coffers. Madoka said the agency will be on the lookout for 700,000 motor cycle taxi operators (boda boda) and one million small enterprises in the new plan.

“We must grow our tax base by enabling more citizens pay their fair share of taxes,” Madoka, also a Retired Major, said yesterday.

Kenya imports more than 120,000 motor cycles every year, most of them ending up in the public transport sector as taxis. Recent estimates indicate that boda bodas generate more than Sh400 million every day – which is however not taxed but could soon be.

It is not clear how the agency will tap into earnings of the motor cycle taxi operators. Another 2.7 million medium enterprises could also start paying taxes in KRA’s most elaborate and ambitious plans. A total of 4.4 million individuals and businesses would be recruited as the agency races to meet rising demand for revenues by the State.

Madoka however did not reveal how much in additional revenues are expected in the new drive, but the amounts is likely to be substantial considering that a vast majority of economic activity does not fall in the tax bracket.

Kenya has just about 1.6 million active taxpayers, mostly salaried individuals according to the revenue collection agency. Madoka was speaking during the launch of this year’s taxpayer month in Nairobi that would see hundreds of KRA employees reach out to existing and prospective clients.

Dozens of teams were dispatched to different parts of Nairobi on a mission to engage businesses and possibly have the proprietors sign up as taxpayers.

“The authority will engage the SME sector to better understand taxpayers in this category, which will place us in a stronger position to design and implement effective compliance strategies, which is critical in developing sustainable taxation systems,” KRA Commissioner General John Njiraini said.

A roadshow kicked off in various parts of the country yesterday that is expected to educate the public on tax compliance and assisting clients file their returns online. KRA is betting on a turnover tax strategy among SME, which would effectively peg their tax bills on the amount of revenues generated rather than the profits made.

Njiraini said most small businesses that are now the target for recruitment do not keep adequate records, neither do they file their annual tax returns.

“In the small business context, opportunities for evasion are high and resources often scarce for field auditing,” he said, adding that his agency had opted for a friendly approach in dealing with the taxpayers.

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