KRA Commissioner General, Michael Waweru. “This Act is more punitive than the Income Tax Act.” Photo/FILE
The Kenya Revenue Authority is turning to more punitive laws to deter tax evasion.
“We recently started using provisions of the Kenya Anti-Corruption and Economic Crimes Act to recover taxes. This Act is more punitive than the Income Tax Act. We want the public to know that failure to pay taxes is an economic crime,” said Michael Waweru, the KRA Commissioner General.
This law allows the taxman to get court orders to seize assets of evaders to recover the value of taxes claimed.
The Act states that KACC can “recover such property or enforce an order for compensation even if the property is outside Kenya or the assets that could be used to satisfy the order are outside Kenya.”
KRA has come under a lot of pressure to raise more tax revenues to fuel public sector spending that has been swelling in recent years.
The government announced a massive budget of Sh865 billion in the 2008/09 fiscal year, with a significant rise in big-ticket infrastructure projects meant to revive the slow economy under the Economic Stimulus Programme.
This year’s budget rose to Sh997 billion as the government chose to further boost the economy through more allocations to public infrastructure projects and short term hiring in the health and education sectors.
Several processes meant to ensure peace and root the governance of the country in democratic principles like implementing the new Constitution are also consuming billions from the State coffers.
The government is keen on reducing its dependence on external grants and credit lines, thus pushing for aggressive tax collection.
KRA collected Sh577.2 billion worth of taxes last year, up from Sh502 billion in 2008/09.
This has seen the government raise 93 per cent of its total budget from domestic sources, including the debt papers sold at the capital markets.
President Kibaki, who officiated at the KRA meeting with corporate tax payers, said the government has already started the legislative process of simplifying laws governing the administration of VAT or consumption tax.
The VAT component accounts for about 25 per cent of all tax revenues but has drawn constant complaints from the business community.
“There are still concerns about VAT, with regard to the complexity of its administration, high cost of compliance, and the long time it takes to get refunds,” he said.
The president added that the government will make a comprehensive revision of the current tax regime, with a view to broadening the tax base and increasing compliance.
Earlier this year, Dr Geoffrey Mwau, the Economic Secretary said there were plans to lower the VAT rate below the current 16 per cent, in a move he said he would boost revenue collections by increasing compliance.
Tax regimes
The East African Community members are supposed to harmonise their tax regimes and it remains to be seen, for instance, how a lower VAT rate in Kenya will gel with the higher rates charged its neighbours.
The president awarded certificates to several companies for their tax compliance and the absolute taxes they paid to the tax man in fiscal 2009/10.
Listed telecoms firm Safaricom emerged tops after paying Sh25.9 billion in duties, taxes, and fees in the period under review.
Since inception, the firm has contributed a total of Sh112.8 billion to the government coffers on the back of rising profitability.
The firm’s profitability is however undergoing the ultimate test in the wake of price wars that have now seen it slash its international call rates by 94 per cent permanently.
Kenya Breweries Ltd that used to be the most profitable company before the entry of Safaricom came second and was followed by the Teachers Service Commission (TSC) that has over 250,000 employees and an annual wage bill of over Sh44 billion.
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