Economy

State tenders system to link KRA in tax cheats purge

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Summary

  • All public tenders will be launched and awarded through a common online platform linked to the Kenya Revenue Authority (KRA) in a policy shift aimed at enhancing transparency and nabbing tax cheats.
  • Treasury Secretary Ukur Yatani has allocated Sh284 million for implementing an online procurement system for State ministries, departments and agencies in the Budget for the year starting July 1.
  • The e-procurement system will be linked to the KRA, which has been pursuing suppliers earning billions of shillings from counties and State tenders without paying their share of taxes.

All public tenders will be launched and awarded through a common online platform linked to the Kenya Revenue Authority (KRA) in a policy shift aimed at enhancing transparency and nabbing tax cheats.

Treasury Secretary Ukur Yatani has allocated Sh284 million for implementing an online procurement system for State ministries, departments and agencies in the Budget for the year starting July 1.

The e-procurement system will be linked to the KRA, which has been pursuing suppliers earning billions of shillings from counties and State tenders without paying their share of taxes.

The Treasury had planned to implement the online public procurement strategy in December 2020, but no funds were approved for this fiscal year ending June.

“Under the e-procurement system, all procurement processes will be undertaken on an online platform where benefits will accrue to the government procuring entities in terms of cost reduction, speed, transparency and accountability,” Mr Yattani said earlier.

The system will be linked to the KRA, Integrated Financial Management Information System (IFMIS), Registrar of Companies and the National Council for Persons with Disability for faster verification and flagging of corrupt dealings.

The KRA enforcement team has stepped up analysis of companies’ financial dealings, especially firms doing business with the national government and counties, to unearth tax cheats by matching their payments and income declared to the authority.

The authority says tax evasion by county and State suppliers is mainly done through faking invoices to inflate cost in a bid to cut duty obligations and failure by county governments to submit taxes withheld from the suppliers and employees.

Some government suppliers have also been filing nil returns even after earning taxable income.

Auditor General reports have pointed to collusion by civil servants and private traders to steal billions of shillings annually.

The chief auditor has persistently called for overhauling the procurement and payments system, IFMIS, which is easily tampered with, arguing that the upgrade is central to halting the looting.

The launch of the common procurement platforms follows the enforcement of Public Procurement and Asset Disposal Regulations in July 2020.

The 2020 regulations, among other interventions, seek to enhance “uniformity of operations” among procuring State entities and promoting domestic economy by inclusion of a local content plan for transfer of technology in international tenders.

Transparency in reporting of public tenders remains problematic amid resistance by some State agencies and departments to disclose information.

Mid-2018, Head of Public Service Joseph Kinyua asked accounting officers in ministries, departments and agencies to consolidate and publish tender information on a special website on the 15th of every month.

A recent report by the Public Procurement Regulatory Authority (PPRA) – the official procurement watchdog – however shows that most State agencies continued to ignore the directive during the 2019/2020 financial year where tenders worth Sh232.77 billion were published on online portal.

The information on the portal should include the basis of awarding the tenders, parameters of assessment, names and details of tender committee members as well as the value of each contract.

The PPRA report showed that about 43.47 percent of the ministries, departments and agencies (MDAs) had not complied with the executive order by fiscal year ended June 2020.

“The authority has continued to monitor implementation of these directives through preparation of reports to Parliament and the National Treasury …. Despite these, the level of compliance has continued to be poor,” the PPRA wrote, noting 433 procuring entities had registered on the portal.

Kenya has for years been in global spotlight for corruption largely in public procurement with the Ethics and Anti-Corruption Commission (EACC) saying that as much as a third of annual budget is lost to graft.

This translates to about Sh900 billion every year, or Sh2.45 billion daily, given the annual budget of about Sh3 trillion.

President Uhuru Kenyatta appeared to acknowledge this in January when he admitted that corruption sucks about Sh2 billion daily from public coffers.