The Kenya Revenue Authority (KRA) plans to deactivate about 100,000 accounts of Value Added Tax (VAT) defaulters in a plan to get rid of tax evaders.
KRA manager for Taxpayer Services Wanja Wang’ondu said those set to be affected are mainly Personal Identification Numbers (PINs) of individuals and businesses that have VAT obligations, but who perennially fail to file their monthly returns or persistently file nil returns.
The planned exercise set to take effect in the next two months comes barely a few weeks after the taxman deactivated slightly less than 33,000 VAT accounts.
“We are talking about a number that that is close to about 100,000. We are in the process of sieving the data so that we ensure that the people we deactivate are those who are not trading,” said Ms Wang’ondu in an interview with the Business Daily yesterday.
VAT is a consumption tax imposed whenever a value is added on applicable goods and services at each stage of the supply chain from production to consumption.
It is levied on the use of taxable products and services supplied or imported into Kenya. The tax is collected by registered persons at designated points in the supply chain and remitted to the KRA.
The VAT Act 2013 and the Tax Procedures Act of 2015 empower the KRA to deactivate the PINs, issue travel bans on suspected tax cheats, collect duty directly from suppliers and bankers of defaulters, and prosecute those in arrears.
Under Section 36(5) of the VAT Act 2013, the commissioner may deregister a taxpayer for failure to keep tax records, failure to furnish regular and reliable returns, and not complying with responsibilities under other revenue laws
The drastic move by the taxman means those affected by the de-listing of their PINs will be effectively cut off from making critical transactions that require proof of active registration as a taxpayer, with serious consequences to their businesses.
The transactions that require proof of an active PIN certificate include registration of land titles, approval of development plans, registration, transfer and licensing of motor vehicles, and registration of business names and companies.
Others are underwriting insurance policies, customs clearing and forwarding, payment of deposits for power connections, supplying goods and services to the State, as well as opening accounts with financial institutions.
The taxman has been under huge pressure from the Treasury to collect more revenue.