KRA detectives have identified wealthy individuals and companies that owe the taxman an estimated Sh250 billion for a crackdown.
Treasury expects to raise more than Sh50 billion from the elimination of the exemptions with a larger share of additional revenue coming from tax cheats.
The taxman’s intelligence and strategic operations have in recent months been investigating rich people’s sources of income and their expenditure against their tax remittances.
The Treasury has set Kenya Revenue Authority (KRA) a target of Sh1.62 trillion in the financial year starting July, counting on elimination of duty exemptions and nabbing tax cheats.
KRA detectives have also identified wealthy individuals and companies that owe the taxman an estimated Sh250 billion for a crackdown.
Treasury Cabinet Secretary Ukur Yatani increased the revenue target by Sh131 billion for the next financial year from Sh1.49 trillion projected for the year ended June amid the effects of coronavirus that hurt revenue collections on reduced business activities.
The State has eliminated tax exemptions such as relief on home ownership savings by workers, helicopter and plane purchases, materials for construction of power plants, tractors, listing at the Nairobi bourse and car import by civil servants working abroad.
“The tax incentives have been benefiting the individual investors in terms of huge profit margins. In addition, the tax expenditures resulted in unfair distribution of the tax burden due to incentives enjoyed by a few taxpayers. It was therefore, found necessary to review and rationalise the tax expenditures,” Mr Yatani said.
He said that firms were currently over-subsidised after the State reduced corporate tax rates from 30 percent to 25 percent in April to ease the pain of Covid-19, arguing that the exemptions have not achieved the intended purposes.
Treasury expects to raise more than Sh50 billion from the elimination of the exemptions with a larger share of additional revenue coming from tax cheats.
The taxman’s intelligence and strategic operations have in recent months been investigating rich people’s sources of income and their expenditure against their tax remittances.
It has also been analysing companies’ financial dealings, especially those doing business with the national and county governments, to unearth tax cheats through matching their payments and income declared.
"We already have established and it is in our record (the Sh250 billion). Whenever we profile a company or an individual taxpayer, we look at what they are earning, their sources of income and everything else vis-a-vis what they have declared," Githii Mburu, the KRA commissioner-general, told Parliament earlier.
The crackdown follows an order by President Uhuru Kenyatta requiring the KRA to keep a watch on high net-worth individuals whose lifestyles were not in tandem with the taxes they pay.
The KRA has been using various databases to pursue suspected tax cheats, including bank statements, import records, motor vehicle registration details.
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