KRA’s new drive identifies over 1,000 tax evaders

The Kenya Revenue Authority (KRA) has identified over 1,000 cases of tax evasion among government suppliers as the authority links up with the devolved entities in a drive meant to increase compliance.

The tax evaders, mostly small and medium-sized enterprises (SMEs), were detected following the recent introduction of withholding valued added tax (VAT) for suppliers to the national government.

The intention of the tax was to capture details of suppliers who were benefiting from public spending while avoiding their tax obligations.

Once a supplier delivered goods or services, withholding VAT of six per cent would be charged and remitted to KRA with details of the supplier.

This way, KRA is able to establish who the suppliers are and then go on to find out whether they had been paying taxes and filing returns.

“We have identified over 1,000 cases of this (suppliers not paying up) nature whose details are being followed through tax recovery,” said KRA commissioner-general John Njiraini on Wednesday.

He was addressing the Press on Wednesday at the Intercontinental Hotel in Nairobi where he launched a campaign to encourage filing of tax returns through the iTax platform which enables KRA to capture data more accurately and also ensures quicker filing of returns.

Mr Njiraini said claims for value added tax refunds by such suppliers would in future not be honoured if their details will not be validated through iTax.

“The implication is that non-compliant suppliers may in the not too distant future lose the opportunity to do business with their compliant counterparts who make correct declarations,” said Mr Njiraini.

He said KRA was in the process of strengthening its capacity to nab goods and services suppliers to county governments who do not pay tax.

KRA will obtain details of such tax evaders from entities with which they do business, which will reveal the amount of revenues they make annually, he said.

READ: Suppliers on the spot as KRA re-introduces withholding tax

There are many SMEs which operate by supplying to other businesses, mainly large and compliant ones which normally retain their transaction details. The information can then help determine whether the SMEs have paid their taxes or not.

Mr Njiraini said that the approach is not meant to impose penalties on, or punish, some firms but to help taxpayers comply with the law.

He said that use of the iTax technology, which is able to match data from various taxpayers, will make the pursuit of noncompliant taxpayers easier.

“In respect of revenue mobilisation, iTax provides KRA with real opportunities to harness technology to counter tax malpractices including evasion. One of the ways in which we are harnessing this power is through cross matching of data filed in iTax by different taxpayers,” said Mr Njiraini.

To popularise iTax services, KRA has opened dedicated support centres in five key urban areas including Nairobi, Mombasa, Kisumu, Eldoret and Nyeri.

“We have also set up help desks in 14 Huduma centres and plan to make the services available in an additional 21 centres to be operational by June 2015,” said Mr Njiraini.

SMEs have been accused of failing to pay tax despite running lucrative ventures across the country. They are said to be the biggest employer after agriculture, but their contribution to tax collections has been negligible.

The Treasury introduced the turnover tax in January 2008. SMEs were supposed to pay three per cent of their revenues as a one off tax.
This was intended for ventures owned by residents whose turnover did not exceed Sh5 million during any year of income.

The tax also excluded business incomes with annual turnover of below Sh500,000, an average of about Sh42,000 per month.

This means that micro businesses are excluded from the rule but they should pay for business permits and other levies to local authorities.