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KRA must find a way to catch tax evaders

Thursday November 1 2018

EDITORIAL
By EDITORIAL
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Tax collection has continued to decline in the past years, leading to a serious cash flow challenge. Fresh data by the Kenya Revenue Authority shows that the tax collection fell below target last year, Sh1.48 trillion against a figure of Sh1.65 trillion. This deviates significantly from the budget plan of Sh3 trillion for the current financial year.

Although part of the budget will be met through loans and donor aid, there still is a big shortfall and that has implications on the economy. It all leads to debt pile-up and consequently creates further squeeze on national resources as repayments have to be prioritised at the expense of other national needs.

SHORTAGES

Already, the government has been forced to introduce new punitive taxes to raise additional cash to plug the shortages, but at a cost to the citizens. Inevitably, prices of essential commodities and goods are bound to rise. Already, maize flour dealers have signalled intention to raise prices given the rising costs of production and doing business.

But the critical point is that tax collection is proving difficult, which is where KRA has to expend its energies. At the heart of the matter is tax evasion. Very many potential taxpayers are out of the net. Just a few, especially those on salaried employment or recognised businesses, pay taxes and, given that they are within the net, bear heavy burden with frequent increases.

OBNOXIOUS

Paradoxically, there is a category of wealthy Kenyans who are completely out of the tax bracket because they have perfected tactics of evasion. Either they keep their cash out there in secretive accounts or manipulate the systems locally to avoid remittances. According to independent estimates of wealth portfolio among Kenyans, the number of the super-rich, those valued to be having assets worth above Sh3 billion, has risen in recent years by 11.7 per cent. Yet most of them do not pay taxes. They own wealth but skip taxation, whereas the low-income earners pay without fail. It is an obnoxious situation that must be demolished.

ELIGIBLE

KRA has on several occasions made strident attempts to close in on all eligible taxpayers but the systems seem to be faulty. Worse, some of the super-rich have devised ways to take shortcuts or manipulate accounts through conniving with tax collectors. Not that they are unknown when demographic information is easily available through technology. It is sheer fraud.

KRA must just expand the tax base to bring in all eligible individuals. It needs to deploy innovative strategies to increase collections. Elsewhere, incentives such as waivers on late tax payments, rather than sanctions, have motivated people to come out and pay — such initiatives can help.

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