Taxman in Sh4.2bn tech upgrade to seal loopholes

What you need to know:

  • KRA says the need to gather data including mobile money records is aimed at ensuring equal sharing of the tax burden between those employed and those in business as well as bringing the informal sector into the loop.

The Kenya Revenue Authority is investing Sh4.2 billion in various technology upgrades in a bid to ease, expand and enhance tax collection and administration.

In the next two days, all taxpayers are expected to have logged in through the online i-Tax system to file returns after the authority abandoned the manual system.

Successful completion of the upgrade will mark the authority’s first step towards its vision of being the first government agency to go paperless in the next three years.

KRA Commissioner General John Njiraini told Smart Company that implementing smart technology will help in expanding revenue base and meeting the growing collection target. The move is also meant to eliminate the stress associated with manual tax filing or do away with tax filling altogether.

“We are moving to the era where we will get rid of tax returns. We have not reached there yet. I will not tell you whether we will be there in the next five years but I can certainly tell you that is the way to go.

I believe that question will be answered in the next decade and we may as well say there is no need for people being asked to file tax returns because we shall have collected so much information that, we will be able to tell them more than they know about themselves,” Mr Njiraini said.

Among upgrades the taxman hopes to implement is a new data warehouse where KRA will be hooked to several databases and use that information to profile taxpayers. Areas being targeted include property transactions, the stock market, banks and mobile money.

The last has, however, been the subject of a bitter row between the authority and cash transfer provider Safaricom. The telco has said it will not provide transaction data unless laws touching on confidentiality are changed.

Complete with business intelligence, the data warehouse will work to smoke out any possible tax cheats and raise audit queries on individuals and corporates whose numbers don’t add up.

KRA says the need to gather data including mobile money records is aimed at ensuring equal sharing of the tax burden between those employed and those in business as well as bringing the informal sector into the loop.

“The whole concept is that information flows into our data warehouse and then we get reports in an automated fashion that allow us to see how the data we have compares with what somebody files or whether the person is in our filing system. Mobile money data is important for us because now most of the smaller players are transacting through it,”  Njiraini said.

Close to 25 million Kenyans

“In fact through this, information about the informal sector is now being formalised... small players may not actually be small players when you look at what they transact on this platform annually,” Mr Njiraini said.

Close to 25 million Kenyans have subscribed to mobile money, according to the latest industry data from the Communication Authority of Kenya. In the first three months of this year alone, Sh840.3 billion was transferred among users.

Last year cash moved through mobile money transfer platforms grew by a fifth to hit a new high of Sh2.8 trillion, according to data from the Central Bank of Kenya. This is a 19 per cent jump.

This means that Kenyans transacted an average of Sh235 billion in real-time mobile-based payments per month, or Sh7.7 billion a day last year. This compared to the Sh6.5 billion moved daily in the full year to 2015.

Treasury also urged KRA to widen the tax net and target the informal sector as the country needs to fund its Sh2.3 trillion budget.

“We must widen the tax net so that everyone eligible to pay tax, including the informal sector, pays tax. In this respect, I have asked the Kenya Revenue Authority to explore ways of taxing the informal sector and to redouble their efforts in netting tax evaders.

Indeed, Mr Speaker, if everybody pays their fair share of taxes, we would be in a better position to lower tax rate,” Mr Rotich told Parliament during the budget speech this year. 

iTax, the system that many will be mentioning this week has so far registered more than 3.5 million users and the number is expected to hit 4 million by the Thursday’s deadline.

By June, revenues from the domestic VAT are expected to surpass KRA’s target by Sh13 billion after those trading with county governments were roped in through withholding regime set to be expanded to include the top 3,000 companies.