The Kenya Revenue Authority (KRA) will be allocated an additional Sh12 billion to pursue tax cheats in a major crackdown after the Treasury proposed to amend the law and see the taxman get a fifth of revenues it collects from import declaration fees.
Through the Finance Bill, 2024, the Cabinet Secretary for National Treasury wants the KRA to get at least 20 percent of the monies it collects from the import declaration fees.
The war chest will allow the KRA to hire extra intelligence and enforcement officers as well up its tech capabilities to bolster revenue collection from planned levies and pursue tax cheats as the Treasury seeks to raise at least Sh364 billion in additional taxes for the fiscal year starting next month.
To shore up revenue, President William Ruto’s administration is proposing tax increases on items such as bread, mobile money transfer, banking, car tax and eco-levy.
The KRA wants to go after tax cheats by integrating its system with that of third parties such as banks, telcos, Kenya Power and land registries.
The Treasury has also proposed to increase the import declaration fees to three percent from 2.5 percent.
Currently, the Miscellaneous Fees and Levies Act requires that 10 percent of the import declaration fees collected to be paid into a Fund and used for the payment of Kenya's contributions to the African Union and any other international organisation to which Kenya has a financial obligation.
“By deleting subsection (7) and substituting therefore the following new sub-section— (7) Ten percent of monies in the Fund under subsection (6) shall be used for the payment of Kenya's contributions to the African Union and any other international organisation to which Kenya has a financial obligation, while twenty percent will be used for revenue enforcement initiatives or programmes," the proposes amendment reads.
A report by the Treasury puts the estimate of the import declaration fees to be collected in the coming financial year Sh60.7 billion, which means the KRA is entitled to Sh12.14 billion should it hit this target.
It is a shot in the arm since the KRA has struggled to meet its annual tax collection targets blaming it on poor financing.
Depending on the discretion of the Treasury Cabinet Secretary, the KRA might also retain about two percent of what it collects on behalf of the Exchequer.
In 2024/25, the Treasury has given the KRA a target of Sh2.95 trillion, which means that its income should it meet its ordinary revenue target will be Sh59.96 billion, pushing the total income to Sh71 billion.
The KRA is also entitled to a bonus of three percent of the surplus revenue collected.
In the Draft Budget Policy Statement, the National Treasury had hinted that the KRA would receive an additional Sh12.9 billion in funding to help with tax administration aimed at enhancing compliance and broadening the tax base this financial year.
The KRA has been pursuing suspected tax cheats using databases such as bank statements, import records, motor vehicle registration, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority that reveal ownership.
Car registration details are also being used to smoke out individuals driving high-end vehicles but have little to show in terms of taxes paid.
Kenya Power meter registrations are also helping the taxman to identify landlords, some of whom have been slapped with huge tax demands.
The taxman also seeks details of suppliers and contractors hired by county governments.
It says a sharp increase in imports of luxury goods and multi-million shilling investments in real estate have exposed a potentially massive tax leakage, which if tapped could yield billions of shillings in additional revenues.
Only a few Kenyans have registered as belonging to the high-income earners’ bracket despite the massive growth in conspicuous consumption.
The additional measures which are contained in the Medium Term Revenue Strategy (MTRS) are aimed at, among others, expanding the tax base, simplifying the tax procedures and ensuring timely tax refunds.
To enhance compliance, the KRA recruited field officers whose deployment briefly helped the taxman to increase tax demands before the court declared their hiring unconstitutional for failing the regional balance test.
In its Budget proposal to the Treasury, the KRA sought Sh57.4 billion in direct funding from the national government to finance its operations for the next financial year. Cumulatively, it was seeking Sh61.8 billion to operate comfortably.
