Economy

Whistleblowers get safe platform to report tax crimes

KRA

KRA commissioner-general John Njiraini (left) and Pancracious Nyaga, large taxpayers commissioner, during a press briefing on revenue performance for the first quarter of 2013/14 at Times Towers in Nairobi on October 7, 2013. Whistleblowers are expected to use a new KRA site to secretly report crimes such as tax evasion, smuggling of goods, unreported income and diversion of taxable goods among others. Photo/FILE

The taxman is adding a new weapon to its intelligence gathering arsenal with the establishment of a website that will enable whistleblowers to report tax crimes anonymously.  

Whistleblowers are expected to use the site to secretly report crimes such as tax evasion, smuggling of goods, unreported income and diversion of taxable goods among others.

The site, whose establishment is being spearheaded by the Kenya Revenue Authority’s (KRA) ICT, investigations and integrity departments, will also allow whistleblowers to report corrupt KRA employees.

To report a crime, whistleblowers will log onto the site incognito and use the same channel to monitor progress on the reported case.

“Once a whistleblower reports a crime, either on the website or through their phones, they will be assigned a code that will be the only way to identify them and the information they gave,” said Tobias K’onyango, the head of KRA’s integrity programme. “At no point during the reporting process will a person’s details be known, even on KRA’s end.” 

The taxman currently relies on walk-ins or e-mails and telephone calls made through their Complaints and Information Centre (CIC) for tips — a technique which has had limited success partly because it requires informants to submit their personal details.

KRA Wednesday invited Expression of Interest in the implementation of the Anonymous Web-based Intelligence Gathering System (AWIGS) by November 6.

Other than facilitating the reporting of tax offences, the system is to be integrated with KRA’s database to enable real time retrieval of tax records of the reported individuals or companies.

The mobile platform comes with software that allows whistleblowers to submit photos and videos in support of their claims and to meet the legal requirements that support admissibility of the evidence in court.

READ: KRA now bets on third party data to net tax evaders

If established, KRA will become the second agency to run the anonymous reporting system after the Ethics and Anti-Corruption Commission (EACC).

Commonly known as the Business Keeper Monitoring System (BKMS), the whistleblower’s platform is used in more than 29 countries and is recognised by agencies such as Transparency International and United Nations Convention against Corruption.

Similar systems have been established in the European Union, the United States and China, highlighting the global nature of tax crimes.

China set up a corruption reporting website in 2009, leading to investigation and imprisonment of several low-level officials, according to Reuters.

Between 2008 and 2012, the Chinese government said it received 301,000 whistle-blowing reports online.

KRA has an informer management programme that requires whistleblowers to fill in their names, postal address, telephone contacts as well as PIN numbers.

This is filled and submitted in an ‘Informer Management Form’ available on KRA’s website.

The form also requires the whistle-blower to fill in details of the person suspected of committing a tax crime, including their physical address and business name.

Whistleblowers are also required to describe the alleged tax violation as well as explain how they obtained the information.

“The system has been fairly successful since it was introduced over six years ago but we expect the anonymous reporting platform to achieve even greater success,” said Mr K’onyango.

“We live in a country where tax evasion is regarded as some sort of heroism but we know there are truthful people out there who are willing to assist but just need the right platform.”

In addition to offering the identity protection, tax collectors normally offer a share of the money recovered to the informants.

The United States’ Internal Revenue Service (IRS) can, for instance, award a whistleblower up to 30 per cent of the additional tax, penalty and other amounts accruing from their reports.

Kenyan whistleblowers, however, stand to take home only three per cent of the revenue recovered as a result intelligence shared — up to a maximum of Sh2,000,000. This reward is regarded as an income and is therefore subject to taxation.

The anonymous system is the taxman’s latest attempt to arrest the wave of tax evasion estimated to be worth billions of shillings.

KRA is under pressure to grow tax revenues and help the government fund the promises that the Jubilee coalition made to Kenyans during the campaigns early this year.

The government has rolled out the free maternity programme in all public hospitals, a Sh6 billion fund that offers interest-free loans to persons under the age of 35 and is preparing for the launch of the laptop for every Class One child next year.

KRA has singled out IT as one of the instruments it will use to widen the tax base and prevent revenue leakage through corruption and tax evasion.

READ: Automation is key to raising tax compliance

“The benefits [of utilising technology] include a reduction in the scope of opportunities available for tax evasion and corrupt activities,” said John Njiraini, KRA’s commissioner general, during the 2013 Taxpayer’s day on Tuesday.

Last year, KRA introduced GPS-enabled ETR machines as it sought create a detailed database of all taxpayers.

The registers were meant to help the taxman collect Sh200 billion KRA is said to have lost between 2009 and 2012 due to inability to tax the informal sector.

KRA also intends use information from third-party data — commercial banks and property registrars — to nab tax evaders after comparing returns from transaction filings and bank balances.

Last month, KRA said it had discovered a transfer pricing racket after auditing more than 40 multinationals, an operation that revealed the extent of revenue leakage in the country.

Most of the suspect transactions involved local companies and their subsidiaries located in tax havens that do not charge income tax or whose tax rates are much lower than Kenya’s 30 per cent.

Conservative estimates from the US-based international financial watchdog, Global Financial Integrity (GFI), have put Kenya’s transfer pricing-related tax losses in the past 10 years at Sh115 billion or Sh11.5 billion annually.

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