The impact of the withdrawal of the Finance Bill 2024 and economic uncertainty which followed the deadly youth-led protests against new and higher taxes saw Kenya Revenue Authority’s (KRA) receipts slow to a decade low, in early months of the current financial year.
As a result, the taxman has intensified the use of various databases to pursue suspected tax cheats to enhance compliance amongst individuals and firms in the tax net.
These include bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority, which reveals individuals who own assets such as aircraft.
KRA Commissioner-General Humphrey Wattanga, in an email interview with the Business Daily, discusses the plans to sustain growth momentum in collections, amidst thinning room for new taxes.
The angry protests that forced the President to withdraw the Finance Bill 2024, was a pointer that some Kenyans feel overtaxed. What is your assessment?
Empirical data suggests the contrary. Despite past efforts to enhance revenue, Kenya’s revenue yield remains below the East African Community target of 25 percent of Gross Domestic Product (GDP).
We need to enhance ordinary revenue collection as a share of GDP from 14 percent to 22 percent and increase the compliance rate from 70 percent to 90 percent by end of FY [financial year] 2026/2027.
What did you make of anti-tax protests as the agency tasked with collection of revenue?
As KRA, our work is fully informed by laws. We aim to efficiently and effectively mobilise government revenue and facilitate trade, by fostering compliance with tax and customs laws.
We would like Kenyans to view taxation from a patriotic perspective, in which we are seeking to fend for ourselves using our domestic capabilities and resources.
In the face of thinning room for new taxes, what measures is KRA putting in place to drive compliance?
We have prioritised system integrations to track taxable transactions. The adoption of modern technology is going to be a game-changer for KRA. We will leverage disruptive technology such as artificial intelligence, machine learning and data analytics, to deliver tools that enable market-customised solutions.
These solutions will simplify tax processes, facilitate trade and enhance voluntary compliance. KRA has established and maintained effective partnerships with both the public and private sectors, specifically concerning access to third-party data, border management and information exchange.
These collaborations are playing a vital role in enhancing compliance.
KRA has over the years struggled to grow voluntary compliance, and President William Ruto, in October 2022 linked this to an environment which is friendly and welcoming to taxpayers. What are you doing to change this?
KRA recognises that voluntary tax compliance has not been embraced by a section of taxpayers.
To address this, we have shifted our strategic focus towards encouraging and facilitating voluntary compliance. We seek to build a more collaborative relationship with taxpayers and create an environment where tax compliance becomes natural part of business operations, rather than a perceived burden.
Some taxpayers feel the compliance processes are still quite complex, and sometimes they are forced to hire experts to file returns and pay taxes…
Through technology, we are working on enhancing taxpayer experience by simplifying tax payment processes and ensuring a positive experience. This will help foster tax simplification and promote voluntary compliance. We are equally championing fair administrative procedures to lower compliance costs.
Kenyans are known to be innovative and creative in using technology to provide simple solutions to some of complex problems. How is KRA tapping into this resource?
We are collaborating with developers to co-create, design and deploy new technology architecture that provides customised solutions, which will integrate with KRA systems through an API [Application Programming Interface].
This will enable KRA to drive simplification of traditionally complex tax procedures, as well as enhance timely and effective delivery of services.
For example, KRA has developed and launched 'Gava Connect', an innovative API platform designed to empower IT developers and young Kenyan techies, to create home-grown solutions that address local needs. These solutions will enable businesses and taxpayers to seamlessly and securely integrate with KRA's key processes.
KRA stands accused of concentrating on a few firms and workers in the modern sector, while majority of businesses and workers in the informal sector do not pay taxes. This is akin to milking the same cow for too long! How confident are you that the strategies and initiatives you are using will rope the Jua kali sector into tax net and yield revenue?
One of the key initiatives under KRA’s tax base expansion programme is netting the informal sector, majority of whom are the micro, small and medium enterprises.
We are determined to grow the active taxpayer base through tailored support frameworks which bolster compliance of dynamic sectors such as the digital economy, agri-business and the MSMEs.
We are implementing initiatives such as tax education programmess, on-site facilitation and collaboration with various government institutions such as Huduma Centres to bring services closer to these taxpayers.
One of the most visible strategies KRA has applied to grow compliance is the partial tax amnesty programme. How effective has this been?
The tax amnesty programmes have contributed significantly to improving tax compliance. Similar to offering a second chance, these programmes encourage non-compliant taxpayers to go back into the tax system and correct any errors.
The programme implemented in the last financial year resulted in Sh43.93 billion in revenue from an additional 1,064,667 taxpayers. KRA also waived Sh507.7 billion in taxes benefiting 3,115,393 taxpayers who are now part of the tax base.
What is your message to Kenyans as far as taxation is concerned?
My call to Kenyans is that they should voluntarily comply with tax laws and obligations. This includes filing tax returns on time, paying taxes accurately and reporting taxable income and transactions truthfully.
Kenyans should avoid engaging in tax evasion or avoidance practices as these undermine the country's revenue collection efforts.