Uhuru order to KRA on traders not paying tax

President Uhuru Kenyatta(left) awards Kabarak Vice Chancellor Vice Chancellor Henry Kiplagat () during the taxpayers awards at KICC on 31/10/18-[ Photo: Beverlyne Musili,Standard]

Even before the ink is dry on the recent tax hikes, the Government wants the taxman to zero in on small businesses and people leading lavish lifestyles and not paying their dues to further grow its revenues.

Yesterday, President Uhuru Kenyatta, while recognising compliant taxpayers, ordered a crackdown on small businesses avoiding the use of the ETR machines and the rich who declared less to the taxman.

The Electronic Tax Register (ETR) creates a digital signature that informs the taxman how much goods are sold, when and what location, allowing the Kenya Revenue Authority (KRA) to cross-check when the tax is remitted by a trader.

The President said KRA’s tax dragnet should leverage on technology and big data to also track the spending of the wealthy and match it with taxes paid.

“KRA must step up its efforts to detect criminals who do not pay taxes. Those using fake ETR machines and pocketing the VAT (value added tax) should be brought to heel,” President Kenyatta said during the Taxpayers' Day.

“High-net-worth individuals whose lifestyle does not match the rate of taxes they pay should also be pursued,” he said.

The Government hopes to use the customer purchase data contained in the ETR machines and mined from technology to make assessments against taxpayers who failed to report and pay of their own volition.

The latest initiative comes weeks after President Uhuru signed into law the Finance Bill that saw an eight per cent VAT imposed on all oil products.

The increased taxation also saw the prices of basic commodities - from food to transportation and even money transfers, calls and data bundles - shoot up by at least five per cent.

Ten Kenyans cumulatively control assets worth more than Sh500 billion, according to an annual wealth report by Knight Frank.

In 2017, another 10 Kenyans joined the exclusive league of individuals whose assets are valued at more than Sh5 billion, raising the number of these rich Kenyans to 90. 

The number of Kenyans worth more than Sh500 million now stands at 1,290, representing a 16 per cent jump from the previous year

The rich, however, can afford to plan to minimise their taxes through avoidance, while the poor pay every penny from their diminishing incomes.

“With iTax, KRA is able to use data analytics to effectively audit this in hope that they will catch invaders and widen the tax net,” said Nikhil Hira, a tax consultant.

John Njiraini, the KRA Commissioner General, said that by December, the taxman will start using the Electronic Tax Register automated solution on consumer transactions, which will catch ETR data in real time and trace those that are inactive.

Another digital system, referred to as VAT Auto Assessment (VAA), has also been installed to compare VAT filling and receipts issued by a buyer and a seller.

The system has, however, come under criticism on its time limits and the fact that a buyer could be punished for VAT inconsistencies on the side of the seller.

Mr Njiraini defended the new system installed this month, saying it was already arresting cases where a seller and a buyer file inconsistent returns and curbing claims of inputs from fake invoices.