KRA commissioner- general John Njiraini. He said KRA is automating Electronic Tax Registers to enable the devices relay entered data real time as part of reforms to improve tax collection efficiency. FILE
What you need to know:
Large and medium taxpayers will from September have to pay taxes electronically.
The taxman will make it mandatory for all medium and large taxpayers to file and pay taxes electronically by September in a move that will capture 80 per cent of the taxes.
Kenya Revenue Authority (KRA) commissioner- general John Njiraini said the rolling out of automated tax payment service named iTAX is currently being piloted and will in August be launched by the Treasury Cabinet secretary Henry Rotich.
“Currently, taxpayers can file and pay their taxes electronically following the introduction of iTAX in July. We expect that by September all medium tax payers will mandatorily pay through iTAX system,” said Mr Njiraini.
He said KRA is automating Electronic Tax Registers (ETR) to enable the gadgets to relay entered data real time as part of reforms to improve tax collection efficiency.
“We have recruited 300 strong field surveillance force who will also police usage of Excise stamps affixed to cigarettes and alcohol products,” Mr Njiraini said.
He said Uganda beat Kenya 70 places in competitiveness on investment climate due to electronic tax payment systems usage. The tax chief said filing frequency and legal complexities were the main challenges facing tax collection in the country.
“We have addressed the issue of filing tax returns, which in Kenya is done monthly through automation; and I ask you to do your part by addressing the legal complexities through enactment of a new VAT Act,” he said.
He was addressing a joint committee of Parliament on Finance, Trade and Planning and the Budget and Appropriation on Friday when he defended the controversial Value Added Tax Bill, 2013 expected to be debated this week.
Mr Njiraini said zero rating, discounted rates of 14 per cent and exemptions had resulted in revenue loses.
“Zero rating has most devastating consequences on refunds. Revenue is foregone on sales plus tax refunded on purchases. This has brought fraud since people manufacture fake invoices, collude with accountants and staff,” he said.
He said the total combined zero rate, exemptions and remissions for 2011/12 amounted to Sh108 billion up from Sh69 billion in 2007/08.
The two committees, chaired by Benjamin Langat and Mutava Musyimi, were taken through the highlights of the Bill by the Treasury officials and KRA ahead of debate in Parliament.
MPs are divided over the Bill fearing that the blanket taxation of essential commodities would lead to a surge in prices of basic goods.
MPs John Mbadi, Abdikadir Aden, Clement Wambugu and Shadrack Manga said the Treasury could do more through efficient collection of taxes as opposed to taxing basic goods.
Mr Njiraini said KRA in 2011 made a painful decision in 2011 to withdraw the Withholding Tax in order to avert the huge backlog of tax refunds. The tax return backlog now stands at Sh29 billion instead of Sh50 billion.
“We withdrew the Withholding Tax that was previously collected on our behalf mainly by the banking sector, the government through its corporations, Kenya Power and Safaricom among others, which were withholding VAT charged on their supplies and remitting to us,” he said.
He said the passage of the Bill will drastically reduce the number of claimants for tax refunds, eliminate fictitious claims and corruption.
“Tax refund has now been restricted to zero-rated supplies of goods meant for export and tax services,” Mr Njiraini said. Treasury PS Kamau Thugge said fear of the Bill was “exaggerated” adding that the passage will streamline tax collection.
“The proposed law will benefit taxpayers, KRA and government through the exchequer,” added Martin Gumo, the deputy director in charge of Economic Affairs.
