VAT helps taxman to exceed target by Sh3.6 billion

By JACKSON OKOTH

The Kenya Revenue Authority (KRA) exceeded its first quarter collection target by Sh3.6 billion.

The taxman collected a total of Sh228.4 billion during the period from July to September, 2013. This is against a target of Sh224.8 billion.

This comes as the taxman begins to reap from the recently enacted VAT 2013 law, which has already seen a rebound in its collection figures.

KRA now plans to move into reforming other taxes including income tax and excise duty among other categories.

Income tax

Kenya’s tax to GDP ratio stands at 21.6 per cent, which is still below its target of 30 per cent.

“I cannot say when we will get there but the ongoing tax reform initiatives that has already covered VAT and will soon move to income tax and excise duty will seal off present loopholes, leakages and exemption schemes,” said KRA Commissioner- General John Njiraini.

He made these remarks on Monday during presentation of KRA revenue performance during the July-September, 2013 period.

The best performer was customs duty whose collection was Sh80.9 billion against a target of Sh79 billion — representing a performance of 102.4 per cent.

It was followed by large taxpayers office which collected 101.3 billion against Sh78.5 billion collected in a similar period in 2012.

Total domestic taxes increased to Sh146.6 billion in the first quarter of 2013/14 compared to 115.7 billion collected in a similar period in 2012. “We are increasing the use of technology to deal with the problem of tax evasion, compliance and enhancement of VAT will also deliver positive results,” he observed.

KRA is also in the process of doing a remote tracking of all electronic tax registers after suffering an initial procurement hitch.

While pressure has been building for the amendment of the VAT Act, 2013, to stop traders from increasing the price of exempt items, KRA insists that it has issued guidelines on which items are affected by the new law. “We have already seen a fall in the price of fresh milk and therefore we need to move ahead rather than make retrogressive amendments to the law,” said Njiraini.

New audits

KRA is already estimating its tax gap, the amount of what it should collect and what is collected.

It is currently collecting data and doing audits, particularly in VAT and Excise — where evasion is high.

 The tax man is also linking with banks and key agencies so that it can compare this data with personal declarations made on property, equity and customs.

KRA blames banks for contributing to tax problems especially in cases where information on deposits made does not reach the agency.

“We suspect that certain unscrupulous bank employees could be working with fraudsters. Banks should be encouraged to deal more in electronic transactions where human intervention is minimal,” said Njiraini.

As matters stand, the local banking system is not yet ready for electronic commerce where all transactions are done from the desktop.