The problem with coming closer to or achieving targets is that an even greater target will be set.
That is the story of the Kenya Revenue Authority (KRA). And the higher the target KRA is given, the more pressure it must assert on taxpayers, so much so that the lion on its logo never sleeps.
Treasury Cabinet Secretary Ukur Yatani now wants you to call it Kenya Revenue Service (KRS) because calling it an “authority” makes it sound antagonising.
“The change of name is intended to rebrand the authority and transform its public image, thus enhancing tax compliance through improved public relations and maintaining a clear focus on taxpayers’ needs,” said Mr Yatani.
But while KRA has always insisted that it operates on the “not a shilling more and not a shilling less” principle, the Mr Githii Mburu-led unit has kept many individuals and business owners awake at night.
Living up to the taxpayer-friendly mien has been an elusive goal despite reforms, including simplifying the tax filing process.
Such has been the relationship with brewers. KRA has ensured all alcohol manufacturers’ premises are fitted with three gadgets - a mass custody flow metre, a radar to monitor what enters their tanks, and CCTV cameras.
Ms Tabitha Karanja, the founder of Keroche Breweries, has seen it all during the company’s 25-year existence.
From courts to alternative disputes resolutions, KRA has not spared Keroche in its quest to get what it calls its “fair share of taxes.”
But the taxman has not just been seeking his fair share of taxes; he has also been seeking a favourable share, especially when it comes to the interpretation of tax laws.
KRA would rather collect more taxes and then be directed to refund than collect less and have to chase the shortfall. And now Treasury CS Yatani is moving to entrench this in law.
The interpretation of what is its fair share of tax on areas such as alcohol, gambling and cigarettes have all had to go all the way to the courts for interpretation.
When KRA is not sure which proportion to tax, it would rather go for the maximum and be called out by the courts, later on, triggering a long wait for reimbursements.
For them, the “R” in KRA only stands for revenues. Having “R” for refund sounds foreign when, for instance, the targeted tax revenue for the financial year starting July is Sh2.16 trillion.
Car & General was recently in court over a Sh677 million customs tax assessment issued against it by KRA, excluding interest and penalties.
The assessment was in respect of the company’s tariff classification for three-wheelers for the years of income 2015 to 2020.
For individuals and companies, there is always the likelihood of KRA making that surprise demand.
Justice Weldon Korir in November last year ruled that the taxman has “become a monster in itself by killing local businesses over alleged failure to pay taxes,” which, in turn, affects thousands of families whose breadwinners are rendered jobless once the companies are shut down.
The judge warned that KRA itself will soon run bankrupt and fail to meet its tax collection targets if it continues with the trend of closing businesses that are supposed to remit the tax.
“When KRA proceeds to kill businesses in the guise of collecting taxes, it becomes an undertaker and will itself eventually die since its survival depends on the existence of income-generating businesses from which it can collect taxes,” ruled Justice Korir.
But KRA in response to a case involving Mount Kenya Breweries Ltd argued it was not seeking anything more than its fair share of taxes and that the judge failed to appreciate the amount of revenue at stake.
Employed individuals with no expertise in filing taxes are not spared either. They are, for instance, sweating over the penalties that have accumulated in the i-Tax system over “unpaid” Pay As You Earn (PAYE) taxes, yet it is money that KRA receives even before they earn the balance as salaries.
And now Mr Yatani wants taxpayers in dispute with the KRA to be depositing 50 per cent of the disputed tax in a special account to be opened at the Central Bank of Kenya as they await the outcome of the ensuing legal process.
According to the CS, tax disputes take too long to conclude, especially after judgement by the Tax Appeals Tribunal.
Amending the Tax Appeals Tribunal Act, 2013 will see taxpayers part with half the disputed tax for as long an appeal case against the taxman drags on.
In case the final determination of the matter is against KRA, the taxpayer will have to wait for up to 30 days to get the money back. PricewaterhouseCoopers (PwC) Kenya notes that the proposal will limit taxpayers’ access to justice and their right of appeal.
“It creates a significant barrier for the taxpayer to appeal to the High Court and appears to usurp the powers of the High Court to make decisions in relation to the treatment of sums in disputes,” says PwC. “Given that tax disputes can take several years to be resolved, the provision is likely to significantly affect the cash flows of taxpayers,” says the consultancy firm.
PwC adds that the provision will also provide KRA with a powerful bargaining position in an alternative dispute resolution process as “taxpayers may be intimidated to settle cases rather than pursue the litigation process.”
Mr Yatani was silent on whether the provision will allow the 50 per cent deposit to accrue interest at market rates and be paid to the taxpayer in the event of a successful appeal. Treasury also wants to broaden the assets available to KRA that can be used as security for unpaid taxes to include ships, aircraft, motor vehicles and any other properties.
The KRA commissioner is also being empowered to use their discretion in deciding which product to exempt from the annual inflationary adjustments.
Handing over this discretionary role to the collector of taxes as opposed to any other body such as the National Assembly adds to the powers of the KRA.
The taxman relies on the inflationary adjustment to be able to collect more taxes and may do so little to rescue consumers, given that tax revenue targets keep going up.