Opinion and Analysis
Review tax administration structures
The Kenya Revenue Authority (KRA) has made remarkable strides on its journey towards achieving its vision of being the leading revenue authority in the world respected for professionalism, integrity and fairness.
Majority of the efforts made by KRA have been effective despite minor setbacks that have affected implementation of key administrative policies.
KRA has implemented the segmentation of top taxpayers into large taxpayers and medium taxpayers. Large Taxpayers Office and Medium Taxpayers Office are currently overseeing the efficient compliance of taxpayers allocated to them.
However, these two stations operate from Nairobi despite some of its taxpayers operating from various counties of Kenya.
These taxpayers are yet to enjoy the fruits of their newly-accorded status. It is high time the authority reviewed its administrative structures to conform to the structures created by the new Constitution and aligned its activities in line with its provisions.
A number of objectives set out under KRA’s Revenue Administration Reforms and Modernisation Programme have been implemented. The SIMBA 2005 system has streamlined operations within the Customs Service Department.
Similarly, the introduction of an imports valuation database cargo tracking system and an electronic document exchange platform (ORBUS) are quite commendable.
Under the Road Transport Department, we are still waiting the launch of smart card driving licences to eliminate forged licences that have led to increased road accidents caused by unqualified drivers.
Tax professionals/ advisors are also looking forward to creation of data warehouses that maintain records of tax rulings from Local committee, Tax tribunals and the Courts.
Such information will enlighten taxpayers and ensure tax advisors are up-to-date with compliance regulations.
This will minimise the number of disputes that apart from wasting precious resources, destroys the relationship between KRA and taxpayers and increases evasion.
In last year’s budget, the government promised to undertake a comprehensive review of the tax system.
This started with the abolishing of the withholding VAT regime, which was one of the elements fueling the huge refunds owed to taxpayers. In addition, the government took the radical move of drafting a VAT Bill that proposed to significantly reduce incentives being enjoyed by prospective investors.
The VAT Bill has led to an uproar from various sectors of the economy over its proposed standard-rating of essential commodities.
Food, education, energy and tourism sectors are actively lobbying against sections of the Bill. It is important that as government aims at maximising revenue collection at least possible cost, it does not do this at the expense of the socio-economic well-being of Kenyans.
During its latest Taxpayers Week event, KRA announced a drop in reported corruption cases involving its staff from nine cases in 2006 to one case in 2011. This is an indication of effectiveness of its internal controls.
However, the recent move by government to declare tax compliance as a measure of a leader’s integrity has created room for a major corruption avenue.
KRA officers are always reluctant to speed up resolution of matters delaying issuance of a Tax Compliance Certificate. It is important that as election fever spreads, KRA puts in place measures that prevent its officers from getting compromised by aspiring leaders.
Finally, with the assurance from Government, communicated during signing of new performance contracts by KRA Board members, that funding to KRA will be increased in the next financial year to facilitate its operations, we expect to see expenditure on effective outreach programmes.
Mr Okumu is a Senior Tax Analyst – PKF Kenya.