KRA to pitch camp in banking halls to directly collect tax from landlords

By Moses Michira | Jul 28, 2016

Kenya Revenue Authority will before September station help-desks in banking halls to help tenants directly pay taxes on their rent.

It is the toughest policy measure yet to net elusive landlords already listed in the tax bracket as KRA strives to collect Sh1.35 trillion in revenue in the current financial year.

KRA boss John Njiraini revealed the latest move after announcing that his agency had missed the target by nearly Sh7 billion for the past financial year.

“We want to facilitate the tenant in a simple and straightforward way to make remittance to us,” Mr Njiraini said, adding, “We are still working on it, but we should be able to roll it out within this quarter.”

The deadline in his statement is September 30 - the date the first quarter of the 2016/17 financial year ends. Equity Bank has been selected for the pilot phase, since it is believed to be the choice of most landlords operating informally, before other banks are brought on board.

In the plans, tenants will be asked to cede 10 per cent of the payable rent to the KRA desk before proceeding to deposit money to the landlords' bank accounts.

Tenants will effectively be agents of the revenue body. It is however impossible to tell whether landlords will buy into Njiraini’s latest plans, coming only months after they defied a tax amnesty that was anticipated to entice them to come forward of their own volition.

Only 1,000 landlords heeded to KRA’s calls in the nine months of the 12-month amnesty, against the targeted 20,000.

The agency had also hoped to raise Sh3 billion, but realised no more than Sh130 million.

Njiraini reported the total collection for the past financial year stood at Sh1.19 trillion, which was however behind targets set by the National Treasury.

A tough business environment last year saw many companies report lower profits, if not losses, leading to a Sh21.8 billion revenue shortfall.

Henry Rotich, the Cabinet Secretary at the National Treasury, taxed KRA to collect Sh268 billion in income taxes from corporations and other entities.

Only Sh246 billion was collected in this category, an amount that was still eight per cent rise over the previous financial year. New employment into the formal sector rose only 4.5 per cent, KRA reports, which is testament to the tough year for businesses.

“Growth in employment numbers was minimal,” Njiraini said. A slump on the volume of imports undermined the revenue collections projections, leading to lower than anticipated Import Duty and the associated Value Add Tax.

Sustained decline on the value of petroleum products for most of last year translated to the lower income from the Customs Department. Lower petroleum prices were however beneficial to households and individuals, through lower energy and transport costs.

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