KRA expands number of tax collectors to meet targets

“KRA will never see much of the incomes of these very rich Kenyans who use only a tiny proportion of their income on consumption but continue to earn millions from transactions such as sale of land, buildings and big cars.

He said most countries including other East African Community member states tax capital gains and there is no reason for Kenya to be left behind.
Uganda, which collects much less taxes in proportion to its GDP, earns 15 per cent of total ordinary revenue from capital gains. “We should tax idle land to stop speculators from holding on to it,” said Mr Kisuu.

In a separate Budget briefing, Deloitte East Africa tax partner Nikhil Hira, said taxation of real estate at the lower end of the market could help raise revenue.

“There is the top, middle and lower end of the rents market and I suspect it is the lower end that doesn’t pay tax because tenants pay rent in cash,” Mr Hira said.

“This lower segment of the rental housing market is so big that if the taxman were to find an effective means of collecting the revenue, there would be significant growth.”

The tax experts also said the Treasury should give KRA the necessary financing support to perform its mandate, saying the taxman needs to keep two per cent of the revenue it collects to run its operations smoothly.

Auditor-general Edward Ouko reported in January that KRA was living beyond its means having consumed more than Sh1.5 billion of accumulated reserves in the past two years. “KRA needs money for capacity building. It has acute shortage of talent and needs to shed excess baggage,” Mr Kisuu said. 

Uncertainty over staffing at KRA has heightened in recent months after the publication of a proposal to hive off the authority’s customs division and make it an independent entity.

The division has 1,329 employees or one third of the total staff. Finance minister Njeru Githae proposed the change in the 2012-13 Budget aiming to realign Kenya’s tax establishment with the EAC Protocol and to the role the department plays in trade facilitation and border controls.

girungu@ke.nationmedia.com