Digital government is data minefield for KRA in revenue race

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

The government has identified the digital superhighway as one of the five core areas expected to have the greatest impact on the vulnerable in society.

It intends to digitise and automate all critical processes, aiming to cover at least 80 percent of all public services.

According to the World Bank, a digital government has benefits, which include enabling the government to set measurable administrative goals to improve public service delivery.

The government is also able to make data-driven decisions and enact evidence-based policies.

The launch of e-Citizen revolutionised access to certain services, which were accessible only in physical government offices but are now available online.

This has also provided the government with invaluable data on the consumption of various services.

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

The Kenya Revenue Authority (KRA) has over the years rolled out various measures to digitise its operations.

With the automation of tax returns filing and declaration, the long queues witnessed towards the deadline of filing the annual income tax return are now extinct.

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

Electronic invoicing, in which value-added tax registered taxpayers are required to raise their invoices in eTIMS, will provide KRA with real-time sales and purchase information.

It will also enable the taxman to reconcile various data sets and identify unexplained variances.

The KRA has now moved into the next phase of digitisation by integrating its systems with other complementary systems to collect and compare data sets to reduce tax revenue loopholes.

For instance, the taxman has indicated that it intends to integrate its tax system with the telcos.

While some individuals have expressed data privacy concerns the possibility of such an integration will provide 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 plans to map rental properties through enhanced field data analysis, mopping up and the integration of iTax into the National Lands Information Management System.

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

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

This will enable a seamless exchange of information, giving KRA a 360-degree view of taxpayers’ economic transactions.

According to the Organisation for Economic Corporation and Development, Estonia has built data infrastructure for public services, including 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.

Notably, Estonia’s tax-to-gross domestic product (GDP) ratio 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.

A digital government presents opportunities from a public policy and tax administration perspective.

In their initial stages, they created a digital identity. 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.