Digital government boost for KRA

Kenya is undoubtedly a leader in the information, communication and technology (ICT) space.

The new administration has made clear its intention to digitise and automate all critical processes, aiming to cover at least 80 percent of all government services.

The launch of e-Citizen revolutionised access to certain government services. Services that were hitherto accessible only in physical government offices can now be accessed electronically by citizens from all corners of the world.

This has made it easy to access those government services while at the same time providing the government with invaluable data on the consumption of various government services.

The data can also be used in assessing various metrics that inform the formulation of targeted economic policies.

The Kenya Revenue Authority (KRA) has over the years rolled out various measures that are aimed at digitising its operations.

With full automation of tax returns filing and declaration, the hitherto long queues that were witnessed towards the deadline of filing the annual income tax return are no longer there.

Taxpayers can file their tax returns from any corner of the world as long as they have internet connectivity.

The adoption of electronic invoicing where VAT-registered taxpayers are required to raise their invoices in eTIMS will provide the KRA with real-time visibility of taxpayers’ sales and purchase information.

It will also enable KRA to perform regular reconciliations between various data sets and identify unexplained variances.

The KRA has now moved into the next phase of digitisation by embarking on the integration of its systems with other complementary systems that enable it to collect and compare data sets in a bid to reduce tax revenue loopholes.

For instance, the KRA has indicated that it intends to integrate its tax system with the telecom companies.

While some individuals have expressed data privacy concerns the possibility of such an integration will provide the KRA with invaluable data that can be used to assess part compliance status of taxpayers.

A proper analysis would, however, need to be performed on the data to avoid unwarranted tax demands.

Additionally, the KRA is set to map rental properties through enhanced field data analysis mopping up and integration of iTax with the National Lands Information Management System.

This is motivated by the growth in the construction industry in the recent past, which has been marked by an increase in rental properties. We have, however, not had a commensurate increase in rental income tax.

Basically, the KRA will have an opportunity to leverage the automation of systems for all key government entities and the subsequent integration of its tax systems with critical government systems.

This will provide an opportunity for seamless exchange of information giving the authority a 360-degree view of taxpayers’ economic transactions.

According to the Organisation for Economic Corporation and Development (OECD), Estonia has built data infrastructure for the provision of public services, including the registration and payment of subsidies in the agriculture sector with 99 percent of their public services being accessible online via a one-time login gateway.

In their initial stages, they created a digital identity (ID card). The ID card was made compulsory and was considered as a way to recognise individuals in the digital world, being the key to allowing the real world to match the digital.

The card is issued by the government and was made a mandatory document.

In the Kenyan context, this would equate to the Huduma card which was set to progressively replace the national identity card and the myriad of cards issued to citizens such as NHIF and NSSF cards.

The government has indicated its intention to close the loopholes that were identified and roll out a similar digital identity card.

Notably, the tax-to-GDP ratio in Estonia increased from 31.1 percent in 2000 to 33.5 percent in 2021.

On the other hand, the tax-to-GDP ratio in Kenya decreased by 1.1 percentage points from 16.4 percent in 2019 to 15.3 percent in 2020.

By and large, the adoption of a digital government presents opportunities from a public policy and tax administration perspective.

The writer is an associate director at Ernst & Young LLP (EY).