Regular upgrade of iTax will make KRA tool more useful

Kenya is increasingly being identified as a trailblazer in embracing and using of technology ranging from individuals, households, businesses and government entities.

The Kenya Revenue Authority (KRA) has in the recent past employed technology to deliver its core mandate of tax administration, which includes mobilising tax revenue to fund government programmes.

Since the inception of KRA, revenue collection has continued to grow while professionalism in revenue administration has been enhanced. However, the journey has not been without its own challenges which have slowed down the achievement of a fully integrated and modern tax administration.

One way of dealing with these challenges was through reforms and modernisation initiatives under the umbrella Revenue Administration Reform and Modernisation Programme (RARMP).

Many positive developments have been achieved with the implementation of the RARMP. Key achievements includes the implementation of iTax that has enhanced domestic tax administration and offers a wide range of online tax services.

The iTax platform was rolled out in 2014 starting with PAYE, VAT withholding taxes and finally corporate income tax and this enabled taxpayers to pay domestic taxes and file tax returns online.

The platform allows taxpayers or their agents to electronically apply for registration of taxpayers and obtain a personal identification number (PIN), generate payment registration numbers (PRN e-slips), file tax returns, view KRA tax ledgers, including checking the status of payments and returns filed and apply for tax compliance certificates and tax refunds online.

Therefore, it is no surprise that the KRA recently won the Adam Smith Award in the category of Treasury Solutions in Africa in June, 2016. The award is universally recognised as the ultimate industry benchmark in treasury excellence.

Winners are selected for innovation, great strategy, collaboration, implementation and quantifiable results in the form of cost savings and return on investments. The KRA was recognised for their introduction of digitised tax collection processes which have enhanced efficiency, reduced transaction costs and brought added service value to taxpayers.
According to the KRA, 1.7 million Kenyans responded to the call to file the 2015 income tax returns through iTax.

With all these returns held online, the KRA now has a rich mine of data about taxpayers transactions at its disposal.
How this data will be used by the tax authority remains an open ended question. Nevertheless, taxpayers should now be wary, especially those who have not been fully disclosing their income and paying taxes thereon that the KRA could soon catch up with them.

Despite the above positive developments, implementation and use of iTax has not been without challenges. Some include omissions and errors on migration of data from the previous systems to iTax.

The platform does not automatically deal with tax overpayments and withholding taxes arising from previous periods that were paid outside the iTax system to enable taxpayers offset these against their tax liability. This is compounded by the slow process of correcting such errors which requires taxpayers to deal with both their station office and the iTax team.

READ: Taxman misses revenue target as tough economic environment bites

READ: Treasury bursts local borrowing target by Sh49bn on tax shortfall

Inaccurate data

It is also worth noting that iTax has not kept pace with changes in legislation or that there is an inordinate time lag to align it with the law. For example, iTax does not allow taxpayers to file corporate income tax returns for a period exceeding 12 months despite both the Companies Act and the Income Tax Act allowing this.

It is also mandatory for taxpayers to provide an auditor’s certificate with the date of signature and the auditor’s PIN when filing corporate income tax returns for branches. Under the repealed Companies Act, branches were not required to appoint auditors and prepare audited accounts (the current Companies Act requires branches to prepare audited financial statements).

Kenya has signed double tax treaty agreements with a number of countries and these treaties tend to provide for reduced withholding tax rates for certain payments made to residents of treaty countries. However, iTax does not automatically provide for these reduced withholding tax rates, which frustrates taxpayer’s bid to remain compliant.

There are also cases of system generated defaulter notifications, many of which arise from the inaccurate data in iTax and these consume a lot of the taxpayers time to deal with.

While the iTax system is a noble undertaking that aims to leverage on technology in easing tax compliance, its implementation needs to be carried out in such a way that it does not erode the gains that it intends to confer, including clear guidelines on promptly resolving the emerging issues.

In this regard, the KRA should consider setting up a forum for regular interaction between the authority and taxpayers to deal with emerging issues.

In the meantime, taxpayers should initiate the process of filing tax returns in good time and regularly check their KRA ledgers to ensure they are accurate.

This will give ample time to deal with issues arising during the return filing and avoid costly penalties for non-compliance.

Nyambego is an associate director at PwC who leads the tax compliance and reporting team.