Counties remit Sh1.4bn monthly, earning rare praise from taxman

From left: KRA commissioners Edith Kingori (corporate support services), Alice Owuor (domestic taxes) and John Njiraini (commissioner general). The authority has introduced withholding VAT for firms doing business with counties. PHOTO | FILE |

What you need to know:

  • Governors told to put money collected to good use
  • The commissioner also faulted counties for doing business with suppliers that are not registered as taxpayers
  • KRA commissioner general John Njiraini said the authority was undergoing major restructuring whose planning is now in the final stages.

The taxman’s collection from county authorities has gone up seven-fold since the onset of devolution thanks to growth in economic activity.

Commissioner of Domestic Taxes, Alice Owuor told Sunday Nation Kenya Revenue Authority now collects an average Sh1.4 billion per month from counties, compared to Sh200 million collected two years ago from location authorities before devolution.

She said the increase is due to improving regional economies riding on increased business activities, as well as better administrative structures established by county governments.

“At KRA, we think devolution is the best thing that ever happened to this country. It has had an immeasurable impact on our collections and, more importantly, has made available key information to us that will help in enforcing compliance,” Ms Owuor said.

However, she added that more needs to be done by county governments, particularly in the administration of payroll taxes.

“While we have seen good progress, we feel that a lot still needs to be done as far as administering income taxes is concerned. Most county employees do not remit taxes on their allowances, which they should,” she said.

The commissioner also faulted counties for doing business with suppliers that are not registered as taxpayers, thereby opening loopholes for tax evasion.
It is estimated that 50 per cent of the companies supplying goods and services to counties either under-report or don’t pay any tax at all.

 “County governments have the key to open revenue inflows. We urge you to collaborate with us in gathering the information for enforcement,” Ms Owuor said.

As part of measures to improve compliance, the taxman has introduced withholding VAT for companies doing business with counties.

This, the commissioner said, will help in gathering intelligence on businesses operating at county level that are currently paying taxes.

Withholding VAT will be charged at 6 per cent.  

REDUCE EVASION

KRA has also proposed that issuing business permits be twinned with payment of turnover taxes in a move expected to reduce evasion.

These are part of bigger changes lined up at the tax authority with a view to improve compliance and net more revenue for the government.

Last month, KRA commissioner general John Njiraini said the authority was undergoing major restructuring whose planning is now in the final stages.

The new structure will see KRA re-organised into two semi-autonomous but inter-dependent agencies — the Inland Revenue Agency and the Customs and Border Protection Agency.

Already, the National Treasury Secretary has — in this year’s budget policy statement — given notice that he will be sending two Bills to Parliament to give the new structure legal backing

Ms Owuor was speaking on the sidelines of the second edition of the two-day Governors’ Summit that ended Friday.

At the forum, governors said they were facing challenges in the collection of taxes, with the main one being corruption.

“We don’t meet our revenue targets mostly because the staff we inherited from local authorities were used to collecting money and using it to directly pay themselves. Most counties are now in the process of automating revenue collection,” Bungoma County governor Kenneth Lusaka said.

At the forum, Kenya Manufacturers Association chief executive officer Betty Maina challenged governors to put the money collected to good use.

“While we appreciate the initiatives most of them have rolled out in health and education, the investing community is interested in better infrastructure which would have a significant impact on the economy and hence yield more revenue,” Ms Maina said.