KRA, Treasury’s Sh2.1bn debt row goes to Parliament

The Kenya Revenue Authority (KRA) has taken its Sh2.1 billion debt row with the Treasury to Parliament amid a push by the taxman for higher commissions for the revenue it collects.

The taxman told Parliament that it has no powers to take action against the Treasury for unpaid agency commissions and bonuses that have accumulated since 2005.

“We have an outstanding amount of Sh2.1 billion that the Treasury is yet to release to us. We are engaging them to get the money,” KRA commissioner-general John Njiraini told the Public Investment Committee (PIC) last week

The taxman is legally entitled to a maximum of two per cent of the total annual collections, also known as agency fees, to meet its recurrent expenditure and buy equipment to carry out the job.

It also earns a commission of three per cent of the revenue exceeding the tax collection targets.

PIC chairman Adan Keynan directed KRA to provide more information on the genesis of the debt, saying it is unfair for the Treasury not to honour its commitment as outlined in the Act.

“We will have to summon the Treasury to shed more light on this debt,” he said.

The Treasury has in the past blocked attempts by KRA to retain the legal maximum fee it is entitled to annually, instead of handing the entire tax collection over to the Treasury and wait to be allocated its portion of the funds.

Allowing the taxman to automatically retain its portion of the revenue would require a repeal of the relevant law, said the Treasury.

The Treasury retains the powers to decide what the taxman gets up to a maximum of two per cent of total annual revenues.

KRA has been getting an average of 1.3 per cent and 1.65 per cent of the total collections, which the Treasury says is sufficient to meet its needs.
This has been a source of friction between the Treasury and the taxman who has been demanding a higher commission.

In 2012, the auditor-general warned that KRA was in the red after posting negative results for four consecutive years, a trend that saw it wipe out more than Sh1.5 billion of accumulated reserves between 2009 and 2011.

READ: Treasury makes U-turn in KRA commissions row

The taxman returned a deficit of Sh121.3 million in the year to June 2012 compared to a deficit of Sh426 million in a similar period a year earlier.
KRA’s collection has increased from Sh201 billion in 2003 to above Sh800 billion.

Rising revenues are primarily a result of the KRA’s crackdown on “leakages”, which has included sacking crooked staff and installing security cameras to monitor illicit deal-making in its offices.

Revenues have also been boosted by rising corporate profits and household incomes linked to economic growth, which have accelerated since President Kibaki took office in January 2003.

The authority has been expecting more funding to grow this number and motivate staff—whom it has been unable to compensate adequately due to underfunding.