Billions of shillings in taxes are held up at the Tax Appeals Tribunal because of disputes between KRA and taxpayers. What mechanism is KRA employing to resolve these disputes efficaciously to free these billions to be spent on improving the lives of Kenyans? Hassan Ali, Malindi
In the 2020/2021 financial year, we concluded 1,167 tax cases, compared to 652 cases in 2019/2020. Out of these, KRA won 982 cases and lost 185. Some 173 cases were concluded in court, while 994 were before the Tax Appeals Tribunal (TAT). The total revenue released for collection from these cases was Sh40.3 billion compared to Sh26 billion in 2019/2020.
However, KRA is also encouraging taxpayers with tax disputes to utilise the alternative dispute resolution (ADR) process because of the many advantages that come with it. Through ADR, the authority was able to conclude 552 cases against a target of 307. The resolution of these disputes led to the release of Sh31.4 billion for collection against a target of Sh10.3 billion.
To fast-track resolution of cases, all ADR meetings were conducted virtually during the year, reducing the average time taken to resolve the cases from 69 days in 2019/20 to 42 days in the 2020/21.
A third of the national budget is lost to tax corruption. How is the KRA board confronting money laundering, tax evasion and avoidance, which are impediments to the authority meeting its revenue targets? Davis Basweti Ombane, Nairobi
We have put in place various strategies and initiatives to seal loopholes and tax leakages even as we strive to facilitate compliance among taxpayers.
KRA has established a robust transfer pricing division that deals with international tax. The division focuses on identifying entities that have international transactions and determine whether their policies are consistent with their transactions to mitigate tax avoidance and evasion. Equally, KRA has robust frameworks that enable it to collect, process and analyse intelligence related to tax malpractices.
Through the frameworks, the authority is able to gather intelligence on tax evasion, cybercrime threats among other illicit financial flows. The authority has also invested in conventional intelligence gathering resources, including people and technology. It is through this framework that during the FY 2020/2021, KRA penetrated tax evasion cartels and collected more than Sh100 billion from tax evaders.
KRA has also employed technological strategies to seal revenue loopholes. Some of these strategies include the launch of a web-based system, iWhistle where the public can unanimously report corruption to KRA. The system has enabled KRA to gather corruption and tax evasion related information from the public, while keeping whistle-blowers anonymous.
The authority has also used strategic collaborations with local and international agencies to strengthen capacity in the fight against tax evasion both locally and beyond our borders.
Sir, many Kenyans believe that the elephant in the room concerning poor tax collection is leakages facilitated by your own employees who are compromised by rogue businesses or employers. What is your take on such allegations? How has the authority been dealing with corruption within? Komen Moris, Eldoret
KRA conducts internal investigations that focus on employees who engage in corruption, fraudulent activities, unethical behaviour and other vices that constitute a breach of KRA’s code of conduct. The authority also undertakes proactive integrity testing programmes on business areas susceptible to corruption and other staff malpractices.
Staff found to have breached the code of conduct or any other laws of Kenya are subjected to internal disciplinary process and in other instances referred to other law enforcement agencies for criminal prosecution. In the last two financial years, 331 cases were investigated, leading to 144 staff members being dismissed, and 155 facing various sanctions such as caution and warnings.
There was a proposal some time back to subject all KRA employees to lifestyle audits. The proposal seems to have fizzled out amid rumours of resistance by staff. What exactly became of this proposal? Is lifestyle audit an undertaking your board would be open to doing for the staff? Silas Muriithi, Uthiru
KRA has developed an anti-corruption policy that has not only enabled it undertake lifestyle audits of its staff, but also conduct integrity testing. The lifestyle audit is an ongoing process at KRA. To date, the authority has conducted and finalised lifestyle audits for 49 staff and the findings were shared with other law enforcement agencies for appropriate action. The success of these audits can be attributed to a coordinated multi-agency approach.
The multiple taxation of investors by both the national and county governments has been cited as among the factors that hinder ease of doing business in Kenya. What collaborations are you promoting between the two levels of government to ensure such investors are not being exploited? Dan Murugu, Nakuru Town
The Article 209 of the constitution allows counties to impose property rates, entertainment taxes, charges for services they provide, and any other tax or licensing fee authorised by an Act of Parliament.
KRA is the collector of national government revenue and advises the government on all matters relating to the administration of, and the collection of revenue. In this role KRA was involved in the development of the National Policy to Support Enhancement of County Governments’ Own-Source Revenue (OSR).
The policy proposes a standardised framework for county governments’ OSR measures as well compliance enforcement. The measures generally aim to strengthen the legal underpinnings for revenue collection and its link with policy objectives: achieving efficiency in revenue administration; enhancing governance and promoting transparency; and making public participation more effective.
KRA has also directly engaged various county governments in capacity building on revenue administration, technology and developing revenue administration technology and laws that ensure fairness, adequacy, simplicity, transparency, and administrative ease.
All these measures are aimed at ensuring that taxation is streamlined between the national and county governments and ensuring that taxation is fair and equitable.
The constitution has waived all forms of taxation against all persons with disabilities who are in business and who have been vetted by their registered welfare associations and certified by the Ministry of Health. What other incentives can the authority offer to them in its corporate social responsibility undertakings? Dan Murugu, Nakuru
The Persons with Disabilities (Income Tax Deductions and Exemptions) Order, 2010 provides that a person with disability may apply to KRA through the National Council for Persons with Disabilities for exemption from income tax. KRA is constantly creating awareness of this benefit and processes to follow.
As we do this, we also prioritise persons with disability in our corporate social responsibility undertakings based on identified needs. For example, we have donated various aids like wheelchairs. Currently, we are constructing a borehole in partnership with the Ministry of Water in Machakos County to serve the vulnerable, including persons with disability.
It is in the public domain that KRA was hard-hit by the Covid-19 pandemic and its impact on the economy. Added to that, there were stimulus interventions made by the government to cushion the vulnerable but which had the overall impact of reducing the tax collected. How is the recovery mission? What is the greatest concern for th authority at the moment? Komen Moris, Eldoret
In spite of the difficult operating economic environment brought about by the Covid-19 pandemic, in 2020/21, KRA surpassed its revenue target for the first time in eight years. This is after a revenue collection of Sh1.669 trillion, compared to Sh1.607 trillion collected in 2019/20. The automation of KRA processes during the pandemic enabled the authority to improve taxpayers’ services and subsequently collect more revenue. For example, KRA implemented the use of a mobile service platform for tax registration and filing, payment of some tax obligations and enquiry services.
Our main concern is how to bring into the tax net the sectors of the economy generating taxable income but are not yet in the tax bracket. Through the 8th Corporate Plan, the authority will implement the tax base expansion strategy. This aims to bring into the tax net two million more taxpayers by the end of FY 2023/24.
Next week: Dr Margaret Nyakang'o, Controller of Budget
