Kenya Revenue Authority closes in on tax evaders

By NICHOLAS WAITATHU

The noose is tightening around tax evaders. This comes as Kenya Revenue Authority (KRA) plans to install enhanced Electronic Tax Register (ETRs) machines by end December.

KRA Commissioner-General John Njiraini said the project to implement remote transmission of ETRs data has commenced and will be complete by end of the year.

He was speaking at the releasing the agency’s revenue performance results for the 2012/13.

The move spells high noon for unscrupulous traders who have been exploiting the manual systems to falsify monthly tax returns.

The taxman is developing a system that links taxpayers’ transactions at the point of sale or in business outlets to a database in real time.

The project, however, means businesspeople will have to incur more costs to acquire new machines or modify them to be compatible to the new system. “The process will enable effective monitoring of ETRs to track usage, disconnection and locality, among others,” Njiraini said.

“The initiative will capture data on buyers for the purpose of implementing customers’ loyalty programme. This is one of the key strategies we will pursue the financial year to enhance revenue collection.”

ETR machines were introduced in 2004. Traders were supposed to install the machines to enable them charge VAT on goods. 

Traders were to source the machines from certified suppliers and then demand the cost of the machine as an expense from the taxman.  The process was later muddled with fake supplies. Unscrupulous traders made it difficult for the taxman to implement the reforms.

 

Transaction capture

Currently, traders file VAT returns monthly indicating all the goods they have levied each month.

By March of 2007, more than 10,000 traders had not complied with the order to install the machines.  “Our aim this time is geared to ensure all the business transactions are captured in our database as they happen at the point of sale,” Njiraini said. 

“The new generation of ETRs will assist in ensuring there is sanity and discipline in business transactions.” In 2004, the list price of ETRs ranged from Sh35, 000 to Sh150, 000 depending on the make, manufacturer and country of origin and supplier’s margins over which KRA had no control.  Pancrasius Nyaga, Commissioner of Domestic Taxes in charge of large taxpayers’ office said the initiative will ensure all the taxpayers are in the bracket.   “We are working on logistics so that we can have certified suppliers who will distribute the machines,” he said in a telephone interview.

“This is geared towards avoiding repeat of past mistakes where fake providers penetrated the market and started supplying dubious machines.”  Nyaga said the idea is geared towards curbing fraud in businesses where traders have been distorting information about taxes they have paid.

A number of traders bought the machines to comply with the order but have not been using them.

Kenya Private Sector Alliance Director Patrick Obath said the taxman’s initiative will enhance revenue collection in a better way.

“The new machines need to be developed in such as a way that traders do not have to prepare VAT returns every month,” Obath said.

“They can be developed such that VAT returns can be prepared every time a transaction is entered.”

He added that doing so, taxpayers can now pay VAT from various avenues, for example, airports, and border points because details of the taxpayer are online.