The government has finally roped in landlords into the tax bracket in its bid to raise additional funds to finance new governance structures.
In his budget statement, Finance minister Njeru Githae on Thursday said the Kenya Revenue Authority (KRA) would bring on board all landlords by mapping out all residential and commercial areas so that they are taxed.
According to KRA, this may bring Sh90 billion in rental income taxes.
Already, the authority has unveiled plans to go after landlords, who have thus far evaded the taxman’s noose.
Another measure that Mr Githae hoped, if implemented, would help in collecting more taxes is the planned restructuring of KRA.
“We shall also undertake a holistic review of the administrative structure of KRA to give effect to the objective of these reforms,” said Mr Githae.
Key among them is making the Customs and Duty Department independent to help it “to mainstream its critical role of trade facilitation and border controls”.
“Kenya Revenue Authority will institute an effective excise tax management system to ensure that all products produced by licensed manufacturers are fully accounted for by type and quantity,” said Mr Githae.
The minister also withdrew customs and excise duty exemption to constitutional office holders, whom he said had been abusing the system.
KRA is expected to collect Sh817 billion of the Sh1.45 trillion budget.
“Revenue collection will have to intensify,” said the Ministry of Planning economic adviser, Prof Michael Chege.
However, latest figures indicate that KRA may fail to meet its 2011/2012 tax collection target with an expected Sh25 billion shortfall.
For the 2012/2013 financial year, analysts project an equally dismal outlook.
In its review of the budget, Renaissance Capital said that expenditure pressures would continue to rise, driven by election and massive infrastructure projects.
KRA’s failure to meet targets comes at a time when donor inflows are waning due to an economic crisis in Europe.
The Organisation for Economic Cooperation and Development said major donors’ aid to developing countries fell by three per cent in 2011, breaking a long trend of annual increases.
Under such conditions, Kenya’s devolution plans may be constrained unless the taxman can seek alternative revenue streams.