KRA hopes to attain target by netting mobile cash tax evaders

After the Treasury Cabinet Secretary proposed to spend Sh2.3 trillion in the financial year beginning next month, the spotlight now turns on the Kenya Revenue Authority.

Faced with lower prospects to collect funds after businesses decried turbulent times, government freezing of employment and the economic downturns associated with the upcoming General Election, the taxman seems to have been pushed to the wall.

KRA might miss the Sh1.215 trillion collection target set for it in the financial year 2015/2016 after results for the 10 months to April showed it had collected just Sh888.1 billion.

While it would take a miracle to collect Sh327 billion in two months, the taxman has been added close to Sh300 billion in new targets.

Tax experts argue that the burden on KRA will not be easy to meet with the various challenges existing in revenue collection currently, as well as the pro-production approach Mr Henry Rotich sought to adopt through budget incentives.

Audit and tax advisory services firm Grant Thorton Kenya director Samuel Mwaura said the taxman will particularly find it difficult to tax the informal sector as envisaged by the CS.

“It will be the burden of whoever is dealing with the informal sector to deduct the tax in transactions where receipts are never issued and implementing presumptive tax will not be easy. I think the government may have targeted to collect all these taxes within one financial year, which has never been the case due to delays in implementation.

The more they delay to implement the Finance Bill 2016, the bigger the gap will be in collection and it is becoming a story of shortages every quarter whenever KRA presents reports,” Mr Mwaura said.

KRA’s current miss from the collections target was partly blamed on delayed roll-out of the Excise Duty Act 2015 from which the government sought to raise an additional Sh25 billion to help fund the Sh2.1 trillion budget.

The seven per cent growth of the economy envisaged by the Treasury in giving the ambitious target to KRA was pegged on the fact that Kenya was involved in various infrastructure projects that would create jobs and spark economic growth.

KRA'S HURDLES
Analysts believe that the vision is overstretched in the wake of recent political events as well as the shifts in the regional economic prospects.

“Mr Speaker, our target to generate one million new jobs remains. In 2016, we target to grow by six per cent and by seven per cent in the medium term. This level of growth will continue generating new jobs and creating economic opportunities for our young men and women graduating from various institutions.

The faster we grow above this level on a sustainable basis, the more chances we have of putting a dent on poverty because many more of our youth who are entering the labour market will be more easily absorbed,” Mr Rotich said.

Already, Uganda made a sudden retreat on Kenya in a joint pipeline plan leaving Nairobi to solely bear a Sh420 billion infrastructure burden to construct an oil pipeline from Lokichar to Lamu via Isiolo expected to be live by the second quarter of 2021.

Two revenue cash cows, the issuing of number plates and driving licences have also been taken away from KRA and given to the National Transport and Safety Authority, further denting hopes to collect more.

Added to the sleepless smuggling ring, well networked tax evasion crooks and internal ethical issues the taxman is grappling with, meeting the Sh1.5 trillion target increasingly appears to be a pipe dream.

KRA hopes now lie in the power to seek records from banks and M-Pesa transactions to catch tax cheats.

“In order to make it easier for taxpayers to submit their tax returns in the i-Tax System, I propose to amend the Tax Procedure Act to grant Kenya Revenue Authority powers to collect information in advance from identified persons for purposes of pre-populating the information in the i-Tax System,” the CS said.

Safaricom’s latest M-Pesa statistics indicate that Sh24.1billion is currently being done from person to business every month, meaning KRA’s initial plan to venture into accessing these records will open up close to Sh300 billion worth of business records to scout for any possible tax evasion.