Economy

Taxman exits with bullish forecast

waweru

Outgoing Kenya Revenue Authority (KRA) commissioner general Michael Waweru at his Times Tower office in Nairobi, February 27, 2012. DIANA NGILA

The chief taxman is this Tuesday expected to effectively end a nine-year tenure at the helm with a board meeting and forecasts that the Kenya Revenue Authority will collect Sh1 trillion annually in three years.

Read: KRA blacklists Airtel, Total over unpaid customs duties

Outgoing KRA Commissioner-General Michael Waweru has in the last few days been inducting four new commissioners as he looks forward to taking what he calls a “big rest.”

The new boss, former commissioner Domestic Tax-Large Tax Payers Office John Njiraini, officially takes over from next weekend for a three-year renewable term. His former position will be occupied by Pancrasius Nyagah, who was set to be inducted on yesterday (Monday) while Customs docket goes to Beatrice Memo. Helen Bila will take over the Support Services department.

“I expect revenue to continue growing unless something happens. We are putting in place measures that would ensure that,” said Mr Waweru in an interview with the Business Daily.

Amongst the reforms KRA is counting on is the VAT Bill which will phase out a host of tax exemptions and zero-ratings, the latter which have seen the Treasury operate a tedious VAT refund system today said to involve over Sh23 billion in claims.

Mr Waweru says the system has been wasteful as even with zero-rating, manufacturers have never been known to bring down their prices despite VAT refunds.

Instead, he says a system where the vulnerable are cushioned through the expenditure side would suffice. As for the exemptions which are largely felt in incentives to investors, he believes their phase-out would seal leakages and increase revenues.

KRA is also polishing a new corporate structure hoped to make it a more nibble and responsive organisation. Of the 17 senior deputy commissioners who have been reporting to Mr Waweru, only 10 will report to Mr Njiraini with the rest redeployed under the plan being implemented with the help of IMF and a consultant, to help the CG concentrate on revenue matters.

Mr Waweru, who has audited President Kibaki’s personal businesses, was appointed in 2003 after involvement in the political outfit called Technical Research Centre, credited with helping Narc grab power from Kanu in the same year.

The former Ernst & Young partner says at the time, rumours were flying around that he would either be appointed to the Central Bank or KRA and first realised how serious the matter was when the National Security Intelligence Services begun the normal background checks.

The rumourmongers were rewarded when then minister for Finance David Mwiraria called him to inform him of the appointment. At the time, he was winding up a consultancy called Finsoft which he ran together with auditor Stephen Kinuthia in readiness to go back to school for an IT degree.

So does, he believe that a new regime would allow the kind of autonomy and facilitation KRA has received under the Kibaki regime? He says there are no guarantees but assumes that whatever government comes to power, it will need revenues.
“We have proved that if there is no interference revenue will go up. I would imagine the next government wants the revenue to flow,” he said.

Tax compliance

Mr Waweru has developed quite a reputation as far as having a political thick skin goes.

Many politicians who have sought help for their friends do not retain fond memories of the outgoing CG and are unlikely to have improved their opinion after KRA insisted on Parliamentary Service Commission paying taxes on their compensation, as a prerequisite of getting a certificate of tax compliance, as per the new constitution.

“Politicians do call and ask to be facilitated but I can’t go beyond what the law says. With time they have realised that they should not bother the authority,” said Mr Waweru.

Equally unimpressed are his friends.

The taxman is known to refer those seeking ‘help’ with tax matters to the commissioners.

Talking to KRA insiders one realises they would have been better off dealing with officers much lower than seeking help from Mr Waweru who normally adds a rider that the law should be followed when sorting out the clients.

“I have not ‘sorted’ matters for anyone or told staff to do so,” he says.

He says he has given the staff confidence to do their work and built them to admirable levels. Amongst those he names as having watched develop admirable capacities are outgoing Customs chief Wambui Namu and former Support Services head Mumo Matemu now battling to head Economic and Anti-Corruption Commission.

Mr Waweru takes pride in building KRA into one solid entity unlike in the past when the departments were operating in isolation. However, in the process, he has had to get rid of several people including commissioners particularly over integrity matters. His regret is that even with this, the integrity issue is yet to be fully addressed at Times Tower.

“I sympathise with the people who were affected but it would have been impossible to change the culture with those with different objectives around. In that respect I expect the new CG to continue doing the same.”

The CG has developed such a reputation that some are reluctant to exchange business cards with him after stories started doing rounds that he donates the same to compliance department. He heartily laughs at the suggestion saying KRA has its own intelligence—he retains all the cards he gets.

As one of the Kibaki administration’s top performers bows out having grown tax revenues from Sh180 to Sh635 billion, he is certain that the organisation is in the safe hands of Mr Njiraini, the man who was chief executive of ICPAK when he was its chairman.

Another of his regrets, he said, is not having fully financed the government agenda despite bankrolling infrastructure and education projects.

For now, he wants to take a break and before taking on a role in future which he hopes will not be as demanding as that of the KRA Commissioner-General.

Staff at KRA will from next year operate under new administrative and political regimes and hopefully, revenue growth will head toward the Sh1 trillion mark soon enough.