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KRA delists 95,000 non compliant VAT accounts

njiraini

Mr John Njiraini, KRA commissioner-general. FILE PHOTO | NMG

The Kenya Revenue Authority (KRA) has deactivated more than 95,000 accounts of Value Added Tax (VAT) defaulters, marking the first phase of a controversial plan to crack down on evaders.

In a statement on Tuesday, the taxman said those affected are mainly Personal Identification Numbers (PINs) of individuals and businesses that have VAT obligations, but have not yet migrated their accounts onto the online iTax platform.

The deactivated PINs account for nearly two thirds of the total 145,367 of those that have VAT obligations, are active in business and generating input invoices but are not iTax compliant.

“A total of 95,015 PINs have been deactivated as at today, 5th September, 2017,” said Benson Korongo, the Kenya Revenue Authority’s commissioner in charge of domestic taxes in a statement.

Taxpayers who have been given 30-day notices to regularise their accounts are set to have their PINs de-activated in the second phase of KRA’s crackdown.

KRA receives an average of 200,000 PIN opening requests every month.

READ: KRA warns iTax non-compliant company directors

Drastic move

The drastic move by the taxman means those affected by the de-listing of their PINs are effectively cut off from making critical transactions that require proof of active registration as a taxpayer, with serious consequences to their businesses.

The transactions that require proof of an active PIN certificate include registration of land titles, approval of development plans, registration, transfer and licensing of motor vehicles, and registration of business names and companies.

Others are underwriting of insurance policies, customs clearing and forwarding, payment of deposits for power connections, supplying goods and services to the State, as well as opening accounts with financial institutions.

On Tuesday, KRA clarified that earlier communication sent from its systems last week to non-compliant tax payers was meant to enable them reach out to its agents to regularise their status.

“The system generated default fine messages do not refer to filing. The 30 days period given by these messages is a period within which a taxpayer can organise themselves to pay the default fines,” said KRA.

The taxman had earlier said the controversial plan to deregister all taxpayers who have not migrated their profiles to its online platform beginning September 1 is part of a wider plan to smoke out tax cheats.

READ: Taxman pushes ahead with PIN blocking plans

Huge pressure
The action comes at a time when the regulator has been under huge pressure from the Treasury to collect more revenue.

KRA in July announced it had collected a record Sh1.365 trillion in the 12 months against a target of Sh1.376 trillion set by the Treasury.

The collections were 13.8 per cent more than the Sh1.21 trillion the KRA received the previous year, largely attributable to increased inflows from consumption taxes.

“KRA has noted that there are taxpayers, who have not migrated their PINs into iTax while others, who are already on iTax, are either not filing or are filing nil or no returns,” KRA had said last week on Thursday in a public notice.

Legal experts had, however, faulted the taxman’s plans to deactivate non-compliant taxpayers’ PINs, terming it illegal.

Citizen right
Lawyers had in the wake of the notice argued that holding a tax PIN is the right of every citizen that cannot be taken away without following due process.

“KRA does not issue PINs to citizens as a favour but as provided for in law, in the same way the Department of Registration of Persons issues Identity Cards or Passports,” Nairobi lawyer Nashon Aluoka had said.

“It is an instrument that every adult needs to transact the business of life and meet their obligations as citizens and can only be taken away as provided for in law or through a court order,” he argued.

The KRA, Mr Aluoka said, has not made clear which law it will be relying on to take such punitive action that is likely to disrupt the lives of millions of Kenyans who may not even be owing any taxes.

KRA data shows that there are 10.6 million registered taxpayers but only 5.8 million are registered on iTax. In the 2016 filing period, which closed on June 30, only 2.4 million taxpayers filed their returns.