More than half of businesses on the Kenya Revenue Authority (KRA)’s electronic Tax Invoice Management System (eTIMS) are not transacting on the platform, underlining the government’s headache in its efforts to expand the tax base.
Latest KRA data show that of the 236,000 businesses that have been onboarded on the eTIMS, only 49 percent are reporting transactions with other businesses, posing a challenge for the taxman even as 679,000 enterprises it had targeted stay off the radar.
“About 49 percent of the on-boarded taxpayers are transmitting invoices through the solutions that are currently available. Not the optimal. We’d expect that taxpayers onboarding are also using the solutions,” said Hakamba Wangwe, the KRA’s electronic tax invoice management chief manager.
The taxman now says it intends to go hard on businesses to find out why about three-quarters haven’t been onboarded and 51 percent of those on the system have failed to transact on the platform.
“At the point where we are monitoring compliance, we’d like to look at uptake in terms of how many have on-boarded and also checking out of this number, how many are using the solution because that is the true definition of success in this implementation,” Ms Wangwe said.
“We gave a grace period up to March 31 when we did not enforce penalties as we gave taxpayers more time to onboard. We’ve only made about 236,000. So what happens to the rest? It means we need to add a layer of initiatives. There is also going to be a layer of enforcement coming in so that as we facilitate taxpayers to onboard, we are also enforcing compliance in onboarding and compliance in transmission.”
All businesses transacting with other businesses in the country are expected to invoice each other through the eTIMS effective April 1, 2024, with the KRA preparing to monitor transactions and have better visibility of claims of VAT refunds by companies.
The law was meant to become effective on January 1 but KRA extended it to March 31. By close of the deadline, 202,291 businesses had been onboarded, with an additional 34,000 joining since the deadline lapsed.
“A majority of the taxpayers are onboarding on the simplified solutions,” Ms Wangwe said, noting that businesses onboarded constitute 26 percent.
The simplified solutions include the use of a USSD code, the web application on eCitizen and a newly introduced mobile app on playstore to take care of small taxpayers, while VAT-registered taxpayers remain on the eTIMS platform. The KRA has since last year been in the field engaging players in different sectors, largely targeting SMEs that have for many years not been tax-compliant.
Ms Wangwe said the KRA has engaged in talks with farmers from horticulture, tea, coffee and sugar sectors, as well as other professionals such as doctors to bring them on board.
The taxman notes that even as the apathy remains for businesses to on-board and transact on eTIMS, high VAT collections have been realised during months when it has gone hard on businesses to present electronic invoices when making VAT refund claims.
“Most of it is attributed to the rollout of eTIMS. We’ve had months such as July 2023 where the growth in VAT went up to 32 percent. That was the time when we had communicated to taxpayers that we would like them to support all their expenses with electronic tax invoices and any invoices not within the system would be disallowed,” Ms Wangwe said.
The authority has put businesses trading with others outside the eTIMS platform on notice, noting that they face penalties.
“There are some who may not be onboard because they don’t have any business they are doing right now but for those who are doing business and not onboarding, you will find us adding a layer of enforcement, which includes penalties,” Ms Wangwe said.
