The disclosure by Kenya Revenue Authority (KRA) that it is spying on people’s social media to determine their lifestyle and if they are compliant on taxes has ruffled feathers among those running businesses online.
The lifestyle probe is expected to force some changes in how people conduct themselves online, whether registered businesses, brokers or just individuals.
KRA’s move comes in the wake of increased registration of business by individuals, many of them operating online.
Many people are also having side hustles such as selling their skills or products online.
Viola Dola, who runs online clothes store ‘thriftwithdola’, said the spying by KRA will not sit well with online sellers as marketing by business owners might be misconstrued as opulence.
She said the taxman cannot determine a person’s earnings just by looking at their lifestyle.
Ms Dola also insisted that business is not constant. “I cannot say that I will get this amount today. It fluctuates with everything,” she told Enterprise.
Setting a standard
Dola also said the move by KRA will cause online businesses to change their marketing approach for fear of being tracked down. She said clients buy into the flashy https://cdn.standardmedia.co.ke/images that online, and even offline, stores create and being forced to tone that down could have an impact on sales.
“When you hide the splendour, then you start losing clients. This what people have subscribed to - seeing you wearing the pieces while going to different places so as you get more hype for your business,” she said.
“If you stop doing that you will also suffer because that is the standard you have put.”
During an interview with The Standard Group’s Spice FM, Nickson Omondi from KRA’s Digital Economy Tax Office detailed the reasons behind the move. He, however, insisted that aside from tax matters, KRA does not probe into personal issues.
“There are people who post properties, then we would ask you if you are the rightful owner of the property. We might ask that you give us the land registration number, or these properties do not actually exist,” he said.
If you are the owner of the property, KRA will go ahead to query whether you are receiving rent or are a developer.
“If you are a landlord, we will inquire if you pay tax on rent or the required tax for a developer,” Mr Omondi said.
“That is the kind of questioning that we do. We do not conduct lifestyle audit per se because we will not be asking you other private issues. We want to stick to tax matters.”
If one is a frequent flyer, KRA will seek to determine the source of income and if it is taxed. They will go further and ask if you file your returns.
“That becomes the end of the story,” said the KRA officer.
The idea is for KRA to smoke out individuals who present a ‘soft life’ on social media but either pay less than the required tax or file nil returns.
“Some of the people who feel rattled are those who have not filed their proper returns, but if you have been doing your rightful duty, or you are not sure and come and check with us if you are compliant, then why worry?” posed Omondi.
There are also people who present a fake life. “We cannot impute that the fake lives amount to tax. We will need to dig deeper, and KRA does that to get the factual position.”
Rukia Ramadhan, a marketing professional, said the showoff lifestyle has been glamourised online, which has given rise to ‘wash-wash’ (fraudulent) businesses. Even when someone travels, she says, they have to share photos of them boarding or disembarking.
She said while the spying might have some impact on businesses, the biggest challenge is on individuals.
“People will shy off, they will reduce posting about their lifestyle because you have to watch your back and see if they (KRA) are looking at you, or there is someone who is going to snitch on you,” Ms Ramadhan told Enterprise.
KRA runs an informer reward scheme that allows people to anonymously inform the taxman of tax cheats. The informants get up to five per cent, or Sh2 million, of the recovered cash.
Ramadhan says small businesses will be cautious on who they deal with “because you do not know if they will turn out to be informants to KRA.”
“We are Kenyans and at the end of the day everyone wants to make money, and someone will be like ‘this is free money’,” she said.
However small businesses, she said, will still be selling online because that is their primary platform and also considering the Covid-19 pandemic that saw a boom in digital businesses.
“I do not think it will have much impact on small businesses, rather it will have more on individuals because people will not be flashing money,” she said.
There is a category of individuals, however, who also sell their products online or are brokers. These, said Ramadhan, will be affected.
This is because such people are used to targeting those who present flashy lifestyles on social media to pitch their products or services.
But with the KRA scare, they will be posting less of their lifestyle, hence it will be hard for the brokers to make sales.
“The person that you think is your target audience is not posting as much as they used to or not showing off as much,” said Ramadhan.
“I think this is the point it will affect brokers and middlemen who come in to broker things on behalf of other businesses. The usual trend of targeting individuals will not be there.”
As a result, brokers and individuals will be spending more money to spread their nets further.
“Then people will end up spending more money to try promote their posts and businesses online,” said Ramadhan.
KRA deputy commissioner in charge of marketing and communications, Grace Wandera, said debate caused by the spying disclosure has had some positive effect on tax compliance.
“This week, we have seen a more than 60 per cent rise in the number of tax compliance certificate applications lodged on the online i-Tax platform,” she said in a statement.
“The spike is commendable as it means taxpayers are willing to comply, and KRA is at hand to provide the necessary support. KRA is a very dynamic organisation that will continue providing tax facilitation services to boost compliance.”
Ms Wandera said KRA applies social media scans among other technological tax compliance surveillance systems within the confines of the law.