Tax processes, filing days cut for firms

Mr John Njiraini, the KRA commissioner- general. FILE PHOTO | NMG
Mr John Njiraini, the KRA commissioner- general. FILE PHOTO | NMG 

Kenya cut the number of taxes companies are subjected to in a year by six and also reduced the time taken to file by 10 hours last year, a new report showed on Tuesday.

Kenya’s overall ranking in ease of paying taxes improved 33 places to position 92 globally, according to the report, which is a build-up of the World Bank’s Doing Business Index.

The higher ranking was enabled by continued improvement in electronic tax filing platform, iTax, even though the costs remained the same during the year.

The Paying Taxes 2018 report, an annual publication of the World Bank Group and consultancy PricewaterhouseCoopers, showed firms operating in the country pay a total of 26 taxes in 185.5 hours on average annually.

Taxation took up 37.4 per cent of a company’s annual profit in 2016, unchanged from 2015, comprising 30.1 per cent related to income, 1.9 per cent in social contributions related to labour while the rest ate into 5.4 per cent of the income.


iTax system

This followed improvement of the iTax system which made filing and paying of corporate income tax and the standards levy easier.

The Kenya Revenue Authority (KRA) in September deactivated the accounts of taxpayers who had not registered on iTax platform, blocking processing of their salaries in the process. 

This was after a half of the country’s 4.8 million taxpayers failed to file their annual returns by June 30.

The findings of the new study are a result of an assessment of the time a model company requires to prepare, file and pay taxes, the number of taxes, the method of payment and the total tax liability as a percentage of its commercial profits.

The PwC Paying Taxes study also looks at the process for claiming Value Added Tax (VAT) and correcting an error in the corporate income tax return.

'Use of technology'

“The use of technology, by business and government, in tax compliance is driving continued simplification and reduction in the burden of tax compliance on businesses,” PwC said in a press statement.

The country ranks above sub-Saharan Africa in the three key parameters used to measure how easy it is for companies to comply with taxation measures.

The report shows it takes a firm operating in Africa 285 hours to file 35 different taxes at a cost equivalent of 47.1 per cent of annual earnings in taxes and social contributions.