There is a rapid wave of technological advancements globally that has significantly impacted the digital world.
A recent survey by KPMG noted that CEOs can no longer sit pretty as technological disruptions have become a mandatory rite of passage. This applies to the Kenya Revenue Authority (KRA), too.
Having been charged with the responsibility to ensure that Kenya is self-sustainable in terms of revenue collection, it behoves the KRA to ensure that it maximises on all available opportunities to deliver on this mandate. Technology is one tool that they must use.
Technology has not only shaped modern economies and modes of operations in industries but it has also created new opportunities and tested existing boundaries.
Technological advancements present the KRA with an opportunity to leverage and adopt modern tools to challenge the norms of revenue collection and administration.
Presently, iTax with its challenges, stands out as the most innovative tax administration tool that the agency has. It is noteworthy that since the KRA employed this online tax system, tax revenues and the level of compliance have steadily improved.
For instance, it is in the financial year 2016/2017 when the iTax platform became fully operational that the KRA collected approximately Sh 1.37 trillion in taxes, an additional Sh115 billion from the previous year’s collection.
iTax may not be the ultimate solution to netting every taxpayer, but the transformation it has brought has led to notable successes in the filing of tax returns, remittance of payments, applying for tax refunds, lodging of tax objections, applying for waivers of penalties and interest and in the requisition of tax compliance certificates.
Unfortunately this last success has been tempered by some new challenges in the recent months.
Overall, iTax is more successful administratively than functionally. Technology adopted by the KRA should not be limited to the administration of tax operations. iTax may be tweaked to facilitate compliance by the otherwise “untaxed” population.
The efficiencies of the current system largely depend on “responsible” taxpayers. By adopting seamless systems, for example, mapping out non-compliant landlords, the KRA will not only streamline its operations, but ultimately broaden the tax base and cushion against tax evasion.
In addition, adopting the right technology presents the agency with the opportunity to bring in more persons into the tax net.
When the more compliant taxpayers are better facilitated to transact their businesses through the platforms provided by the KRA to enable them handle their tax affairs more easily, compliance becomes the normal mode of operation.
One such facilitation would be ensuring that it becomes easy for a taxpayer to claim input Value Added Tax (VAT) credits, or making it seamless to obtain VAT refunds claimed by qualifying persons.
This way, the KRA will effectively ensure that more “non-compliant” persons are brought into the tax net as it will be “bad” for business to transact with persons from whom you will be unable to obtain input VAT credits. By facilitating the “compliant” persons’ businesses, the KRA will effectively “lock” them into transactions with other “compliant” persons. More “non-compliant” taxpayers will then note the benefits that come with tax compliance.
This is not to say that the KRA has not properly embraced technology. In addition to iTax, it has now implemented the Integrated Customs Management System (iCMS), the Customer Relationship Management System, Cargo Scanner Management Solution and Excisable Goods Management System.
While these are strategic instruments that may, and can, improve tax compliance and minimise operational costs, they are only as good as how effectively they facilitate trust and the business operations of the taxpayer.
The proper use of enabling technology would go a long way to build trust by enhancing transparency and promoting accountability. By default, the upshot of leveraging technological advancement by the KRA is increased tax collection.
Alambo is a Tax & Regulatory Services Manager at KPMG Advisory Services Limited. [email protected]