Boss Talk

Why KRA is eyeing the nice things you post on Facebook - VIDEO


Kenya Revenue Authority (KRA) Commissioner-General Githii Mburu. PHOTO | JEFF ANGOTE | NMG

On the day James Githii Mburu took over the corner office on the 3oth floor at the Kenya Revenue Authority’s Times Towers headquarters in Nairobi, he says he found a newspaper cartoon that summed up the organisation he was inheriting — a big dilapidated, weather-beaten, old land cruiser vehicle perched on stones, the engine billowing dark smoke, which would require more than just a mechanic to get it roaring back to life.

He framed the cartoon and placed it on top of his drawer, perhaps as a reminder of the agency inherited. Today, the former intelligence chief says it is time for a new caricature to be drawn, depicting the KRA as the latest V8 in town, on a full tank, running tax cheats out of town.

Mr Mburu spoke to the Business Daily about how in just over two years, he has transformed the agency into a world-class tax collector, whose achievements are now being benchmarked by other countries on the continent and beyond.

You have become very aggressive. Now you want to go after Kenyans on social media. When is it too much?

I wish Kenyans would understand that after doing this job for many years, it stops being a job. It becomes like a calling. We feel it when businesses and individuals are paying taxes and others are not. The burden is left on a few people.

This is what gives us sleepless nights. You will find us here in our meetings planning, and doing a lot of things. We have teams of people here who are just looking for information, identifying these people who are earning income, and not paying taxes.

We call this tax base expansion. Some of them are physically on the ground, walking around, looking at those businesses and buildings, others are using databases like we normally have access to IFMIS. We want to see, if anybody is being paid by the government, is he or she paying taxes?

We also work with other third parties like Kenya Power. We know you can build houses from loans, but that loan must be repaid from somewhere. That is why perhaps Kenyans are feeling we are very aggressive. But when I see a big car, I see taxes.

When people post those nice things, I want to know, have they paid taxes? It is for their own good. We also do not collect taxes that are in dispute, until that dispute is resolved. How can you hire us and expect us not to do our jobs properly?

Is there anything to show for this aggression?

By the end of October, KRA had surpassed its targets by Sh25 billion. Is this not a good place to be given our previous record of not meeting targets? Ask yourself, what can the Sh25 billion do for you? Building 10,000 classrooms will cost us about Sh8 billion and they are going to be built by people in the local community.

So when Kenyans say I am too aggressive, that may be the feeling out there, but I am not collecting a shilling more. I can’t be allowed by the justice system to collect a shilling that I am not owed. Now that we have collected more money, shouldn’t Kenyans be applauding us for doing our jobs?

But you have been stepping out of the line, haven’t you? At least going by a recent ruling by a judge directing you to stop killing local companies.

Sometimes I am surprised how Kenyans sympathise with tax evaders a lot. They are very angry when people steal money from Kemsa and these other places. But when a tax evader is being arraigned, they say KRA is closing businesses, they shout KRA is too aggressive.

But is this not the same money? Money being stolen through tax evasion and through corruption is still theft of public money. Allow us and the courts to sort out this issue because we have checks and balances. Tax evaders are not some nice people.

Must you close down companies as you demand taxes?

There are businesses whose model is purely tax evasion. The law recognises these kinds of people and has provided ways of dealing with them. When you commit an offence, it stops being civil to criminal. So we have to investigate you.

If you are a manufacturer of alcohol, these are the most affected. We find you in your premises you are fixing fake stamps, the objective is obvious you want to evade taxes. So we must mark that factory as a scene of crime, because we have an offence to prove.

If a magistrate is able to visit the scene of crime as quickly as possible and note the evidence, then we can release that scene and you can continue producing. But before that is done, how will we be able to prove?

Is there no other way to do this and still protect jobs?

The reason we are very forceful on this is there is a legitimate business, which is producing alcohol, cigarettes and so on and it is paying taxes and employing Kenyans.

Then you come in and are not paying taxes, you compete with the legitimate ones because your products are cheaper, you move your products at the expense of the other companies paying taxes. So if you do not close these illegitimate ones, you will close the legitimate ones. If we allow tax evaders to continue, we are effectively closing the other businesses that pay taxes.

What is the extent of tax evasion in the excise industry?

I just looked at a period of about three years or so, and I saw the country through smuggling, must have lost about Sh70 billion. So we have to be very tough on these businesses.

But your officers have been accused of being corrupt. Some use the tax collecting tools you are creating to terrorise taxpayers.

If there is anyone being mistreated or being mishandled by KRA officers, we have a process. Get into our iWhistle. We have a full-fledged contact centre, call, report. Our emails are there. We are here as servants, to serve the people. We are not overdoing tax collections because there are adequate checks and balances to ensure KRA officials do not overstate their mandate.

But have you found any rogue staff through these mechanisms and what action have you taken?

In terms of separation of our staff, we have a group that is still in court, but in terms of investigations that we have completed, more than 80 of our staff have gone home. That is a big number and it expresses the seriousness that we have in terms of ensuring that we have zero tolerance for corruption.

Even when we have not gotten you directly doing something wrong and we have intelligence that you are doing the wrong thing, we have a lifestyle audit. Each year we do about 15 to 20 targeted lifestyle audits and what we have done with those reports is that we share the findings with EACC.

We also assess and collect taxes from KRA staff. If you cannot explain how you got your wealth, to us that is misconduct.

There were reports that you were deactivating PINs? Why would you do that?

We do not deactivate PINs, you know they are the right of Kenyans because a PIN is used beyond tax. You may use it in land transactions, purchases of motor vehicles and so on. A PIN is a tax identification number and we do not deactivate or deregister.

What we do, is that you could register for an obligation which you do not have. Sometimes it is erroneous. Maybe you registered saying you will be paying PAYE or VAT yet you do not have these obligations. So we have been cleaning up the system, removing these obligations since they may be used by criminals to claim input tax purporting to have sold to you.

OECD framework. Kenya is among only two countries that have not signed. What is the Win-Win situation you are looking at?

We are members of the all-inclusive OECD framework that brings together about 140 countries. We are working towards a framework of getting fair taxing rights for multinationals. All we want is to ensure that we receive a fair share of taxes from these multinationals that operate here.

Why would you access our country, generate income and not pay taxes? Other countries reached an agreement and set up criteria, but we have a challenge with the formula because it says the companies have a global turnover of a certain amount, and also dictated what profit the company must make, and only 25 percent of the profit is available to be shared to all the countries outside its mother country.

So we had issues with this. When we looked at the formula, we realized that out of about 89 companies operating in the digital economy in this country, only about 11 were in scope, meaning that the rest will earn income here and Kenya will get nothing.

What are those out of scope?

Those out of scope include Netflix, people are watching, downloading movies here and they will not pay taxes. Why should they be left to go scot-free? Kenya and Nigeria are the only countries in Africa who raised issues with the formula. OECD is sending representatives this November to listen to our concerns.