Kenya taxman targets landlords in drive for new revenues
Photo/Stephen Mudiari
KRA Commissioner- General John Njiraini during a press conference at Times Towers in Nairobi on April 19, 2012. With him is Ms Alice Owuor, the Commissioner for Domestic Taxes. KRA has turned its focus on real estate taxes.
The taxman on Thursday announced that he will henceforth target landlords in the quest to expand Kenya’s revenue base.
The declaration puts tenants at the risk of massive rent increases.
John Njiraini, the Commissioner- General at the Kenya Revenue Authority (KRA), said the agency was preparing a register of all properties in the country’s major towns in readiness for a crack that a “significant number of the landlords are not paying taxes despite receiving rental income every month.”
The taxman is hoping to net billions of shillings in property taxes that should help it realise the set revenue targets and balance the national budget.
The Treasury has this month had to cut Sh72 billion from the Sh1.15 trillion Budget it had tabled in Parliament last June after tax revenues consistently fell below the targets and the country faced increasing financing demands.
KRA is expected to close the current financial year with a Sh21 billion gap on its revenue target.
Mr Njiraini attributes the revenue shortfall to cuts on taxes and duties on kerosene and foods that the Treasury effected late last year to reduce the pain of a rapidly rising cost of living on low income households.
In early 2010, Internal Security minister George Saitoti announced a plan to conduct a property audit in Nairobi and Mombasa to determine ownership of buildings following claims that illicit money was behind the real estate boom.
But KRA said it had done its own survey in one estate, which it plans to extend to other estates in search of the cheats.
“We have sent out demand letters to the concerned owners and would like to warn others that unless they pay up, we will catch up with them and they will pay not only the taxes due but also penalties and interest,” said Mr Njiraini.
Kenya’s real estate sector has been growing steadily in the past five years, but the taxman has largely been left out of the gravy train as evidence by minimal growth in revenues from the sector.
KRA had in 2005 announced plans to use bank accounts to start taxing landlords but the move fell apart after banks refused to cooperate.
Mr Njiraini said the agency will use every measure, including mobile money transfer transactions, and even company registrations to find the tax cheats.
“In future, we will ensure that people are registered for tax at birth so that by the time they are 21 years, our systems will automatically begin to remind them to pay taxes,” he said.
“Even companies will be registered for tax at the time of formation and registration.”
KRA has recently introduced a tax filing system that requires taxpayers to disclose the names and addresses of their landlords, from whom the taxman should demand taxes.
The system does not appear to have helped KRA get to the tax evaders and it has not helped that people with income from employment only have been exempted from directly filing the taxes.
Caroline Kariuki, CEO of the Mortgage Company, said the size of the property market in Kenya is not known but added that a survey being currently undertaken by the Ministry of Housing is likely to provide some answers.
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