The Kenya Revenue Authority (KRA) has begun issuing tax demands to businesses after stepping up inspection visits by newly deployed enforcement teams.
The tax demands come barely three weeks after the KRA began deploying officers with paramilitary training to the doorsteps of Kenyans to enforce tax compliance as the race to hit a revenue target of Sh2.7 trillion by the close of the current financial year hots up.
A tax demand is a notification to pay tax.
Insiders at KRA said the new enforcers have unearthed many cases of suspected tax evasion with notices of tax demands expected to rise further as the inspection visits intensify.
In a letter, seen by the Business Daily, by KRA’s Domestic Taxes Department addressed to a taxpayer, the tax man has demanded an audit of the premises sales and bank statements going back five years to 2018.
The KRA has also demanded to see the premises business permit, cash and receipt books, mobile money statements including all M-Pesa till and paybill numbers, wages schedules, tenancy agreements, and rent receipts.
“Kindly provide the documents within seven days from the receipt of this letter. Failure to provide the above, our office will estimate your business income, issue additional assessment, and initiate enforcement measures against you, in line with section 29 of the Tax Procedures Act of 2015,” KRA’s letter to the affected taxpayer reads in part.
The KRA officers known as revenue service assistants (RSAs) have been undertaking field visits to register businesses online.
The assistants include 1,400 officers who graduated from the Kenya Defence Forces Recruits Training School in August.
RSAs are also tasked with the rollout of the Electronic Tax Invoice Management System (eTIMS) aimed at ensuring the optimal performance of VAT revenue collection.
The RSAs are expected to conduct market surveillance to identify non-registered traders, and continuous patrols to ensure customers are issued with tax receipts by traders.
The KRA has been striving to go after the hard-to-tax sectors of the economy, which largely covers small and medium enterprises as it battles to meet its Sh2.7 trillion tax collection target by next June.
The RSAs are expected to close the gap to the hard-to-tax sectors ensuring that they too pay their fair share of taxes.
“The hard-to-tax sectors are characterised by informality, limited record-keeping, lack of visibility of transactions by taxpayers in this sector and inadequate regulation,” the Treasury noted in its draft medium-term revenue strategy.
“Further, most players in these sectors believe that they are not obligated to pay taxes on self-generated incomes leading to high levels of non-compliance. In Kenya, major sectors under this category include the informal sector, agriculture sector, and the digital sector.”
The informal sector has been identified as one of the hard-to-tax sectors given the lack of the sector’s transactions visibility by the taxman.
The National Treasury notes the government plans to explore the use of information technology and sharing of data with county governments, other private third-party data sources, and Ministerial and State Departments as alternative measures to bring taxpayers in the sector to the tax net.
Other interventions noted include the use of customs data to trace micro and small enterprises that deal in imported merchandise and, the introduction of sector/location-based presumptive tax which will take into consideration the unique nature of businesses to bring equity and fairness.
The exchequer has also considered amending the Data Protection Act to exempt KRA from the provisions of the Act for ease of information access.