KRA seeks simpler trade rules to stop tax evasion

Regional governments have been asked to harmonise and simplify trade policies to curb tax evasion that is fuelled by loopholes in the Northern Corridor. 

The commissioner general of the Kenya Revenue Authority (KRA), Mr Michael Waweru, asked the policy makers to consider collecting taxes from the first point of entry to boost revenue collection.

Securing the movement of the cargo along the corridor is a major challenge East African countries are facing, he said.

KRA earlier this year started an electronic cargo tracking system to monitor movement of transit goods from the dispatch at Mombasa port until they have crossed the Busia or Malaba border points to the landlocked region, but diversion still goes on.

The solution known as Hi-G-Data seal is installed by a radio frequency identification (RFID) solution developer: Hi-G-Tek Inc.

The new system, which is to be fitted on goods in transit, will replace the conventional mechanical seal.

It is also meant to do away with the current cumbersome escort of cargo to Kenya’s borders.

Through the physical escorts, the taxman has not been able to seal the loopholes that importers use to bring in goods purportedly destined for neighbouring countries, only to dump them in the local market.

Escort officers are sometimes used by unscrupulous importers to fraudulently certify exportation of the diverted goods, Mr Waweru said.

Despite increasing the security bonds for transit cargo to Sh10 million, KRA is yet to win the war on diversions.

The authority demands that transporters place a security bond of Sh10 million for goods in transit and such trucks are barred from carrying cargo other than those on transit.

But the security bond may not be a sufficient as a deterrent measure.

“Due to the insufficient security bond, it is profitable to offload the good into the local market as the amount of bond is considerably less than the actual taxes payable on the goods,” Waweru told delegates attending a recent trade facilitation workshop along the Northern Corridor held in Mombasa.

At the moment, it is hard to confirm the correct value, quantities and description of goods in transit.

Automating and integrating regional revenue bodies processes would be able to deal with such problems, he said.