Agencies and payment platforms on KRA’s radar

Professional bodies will now be compelled to open up their membership books for the Kenya Revenue Authority (KRA) as it looks to rope in more people into paying taxes.

The National Treasury has proposed changes in law which will require professional bodies as well as agencies charged with licencing different categories of workers to ask their members to submit their Personal Identification Numbers (PINs).

Additionally, Treasury -- in a proposed amendment to the Tax Procedures Act -- will also require the bodies to give KRA access to the registers containing details of their members as it seeks to tax them.

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Powerful sources

The proposed amendments are in the Finance Bill 2019 which Treasury CS Henry Rotich lodged in Parliament Thursday. The amendments will also require companies acquiring paybill and till numbers to deposit PIN numbers with their mobile phone operators.

“The Bill proposes to add the following as transactions for which a PIN is required – registration and renewal of membership by professional bodies and other licencing agencies and the registration of mobile cellular paybill and till numbers by telecommunication operators,” reads the Finance Bill in part.

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“The proposed amendment enhances the transactions that require PIN to give KRA access to data on active professionals and other self-employed tax payers, for purposes of compliance and enforcement.”

Professional bodies are a powerful source of information on members, with many professions such as doctors, engineers and lawyers being required to register and renew their membership annually to practise in the country.

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Consultants bidding for big contracts are in almost all instances required to be affiliated to a professional body, which also helps the case for employed professionals looking to move up the corporate ladder. This has made such bodies critical for many Kenyans working in the formal sector and their registers would make a valuable data vault for the taxman.

Among the most visible professional bodies include the Medical Practitioners and Dentists Board of Kenya, the Law Society of Kenya (LSK) and the Institute of Public Accountants of Kenya (ICPAK).

Potential taxpayers

The amendment is among the raft of measures that Rotich expects will help KRA raise an additional Sh37 billion in the 2019/20 financial year to finance the country’s Sh3 trillion budget.

While mobile phone operators have been asking for PIN numbers of enterprises seeking to receive mobile payments for the goods and services they offer through the paybill and till number services, the law had not yet been reviewed to include them as among the transactions requiring one to have a PIN.

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KRA, which has intensified taxpayer recruitment, earlier this week said it added three million new taxpayers and now has total 13 million that have PIN numbers.

A chunk of these however remain outside digitally monitored iTax platform.

The KRA PIN count currently stands at 13,026,927 of which 8,998,872 PIN details have been registered in the iTax portal and are consistently being tracked through data driven compliance initiatives.

In 2017 KRA held a total of 10.6 million Kenyans with PINs, but only 5.8 million taxpayers were registered on the iTax platform.

KRA says it is still in the process of finding out who the pin holders not registered on iTax for compliance are.

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“Whereas we have initiated tax base expansion, KRA is also cleaning the taxpayer register to identify PIN holders that have either been restructured, wound up or no longer operational as well as those who may not necessarily be taxpayers but who only obtained PIN to facilitate their access to services,” KRA said.

Analysts say Treasury has been using KRA’s numbers of potential taxpayers in their models to predict revenues, even though a huge number including students, the jobless and pensioners cannot pay taxes.

“Basing collection on the number of tax payers more than growth is a bad thing because even students require PIN to access loans. If you use this to asses revenues, then projections will be fundamentally flawed,” said Christopher Kirathe, an Ernst & Young tax partner. 

Mr Kirathe said the government should look at the quality of the tax payer because just basing it on number is not commensurate to tax growth.

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