The Kenya Revenue Authority (KRA) has renewed its push to rely on technology and contact verification of business activities to bridge the sharp disparity in the country’s tax contribution.
According to the taxman’s data, only 40 percent of registered taxpayers are actively remitting and filing taxes.
For instance, on the corporate side, over 3,000 large and over 6,000 medium-sized businesses and corporations are contributing to 60 percent of the country’s realised revenue.
“That is to say, if you look at the nature of the taxpayers that we have, these are big corporations, multinationals, so the nature of businesses that they do as well deserves that they pay that fair share of taxes of 60percent. But that does not mean we are not looking for taxes to be paid from elsewhere,” Weldon Ng'eno, Commissioner, Large & Medium Taxpayers, told Business Daily .
“In this case, then, they do business in Kenya, and the kind of business they do, they are also making good profits, which we ensure that as they do business, we facilitate them to earn a good income, but also contribute to the development of the country,” he added.
KRA has 22.6 million registered taxpayers, out of which only eight million taxpayers are actively paying taxes.
Low percentage rates in both Personal Income Tax (PIT) and Corporate Income Tax (CIT) reveal a structural imbalance, where the tax burden is concentrated among formal sector employees.
Currently, KRA is forgoing over Sh500 billion in PIT, despite realizing Sh12.5 billion in the last financial year, representing a 97.7 percent gap.
Value Added Tax (VAT) collections potential stands at Sh1.031 trillion against a realized collection of Sh653 billion, leaving a measurable gap of Sh378 billion.
Current rental tax collection is Sh13.7 billion, against an estimated revenue potential of Sh80 billion. KRA reports that the Sh 66.3 Billion is a measurable gap, going by the realization of Sh16.6 billion yield from closing just 25 percent of the regulatory and vigilance gap to net in rental tax.
In the last 30 years, Kenya's workforce has structurally shifted as six times more workers operate outside the tax net than inside it. These informal workers and businesses are responsible for the big tax contribution divide.
By 2024, the Kenya National Bureau of Statistics (KNBS) reported there were over 19 million informal workers and three million formally employed.
“And if you look at the actual numbers, our tax to GDP right now is about 14 percent. We should be at about 16-17 percent currently. So what happens, if you see the gap, the biggest gap we have for tax, it is personal income taxes,” George Obell, Commissioner for Micro and Small Taxpayers, explained.
“That gap is as high as 97 percent. The next is a VAT gap of 38 percent. So all these ones contribute to the overall gap that we see. And we have moved ahead and started the journey of making sure that we get more and more people contributing.”
KRA has reported that there are over 2 million operating enterprises and an estimated active businesses in Kenya. Of these tracked businesses, over 560,000 enterprises have administrative visibility.
The taxman says that these businesses report an average monthly income of $49,000 of taxable income outside the system.
