Kenya should seal revenue leaks

KRA Commissioner General John Njiraini. [PHOTO: FIDELIS KABUNYI/STANDARD]

Two stories carried in last Friday’s edition of The Standard should concern the mandarins at State House and The Treasury.

The lead story on the business page reported on measures the Kenya Revenue Authority (KRA) is adopting to reduce the widening gap between its annual target and the actual collections. The second story reported the Communications Authority of Kenya (CAK) Director General Francis Wangusi, saying the country is losing huge amounts of money to unscrupulous communications providers who have found an easy way of offering cheap internationals calls that do not include payment of any fees or taxes.

The first story underscores the Treasury’s penchant for introducing new taxes — in this case the Excise Duty Act passed last month — while the second one is a clear demonstration that some law-enforcement agencies are sleeping on the job. This leads analysts to conclude that these agencies would do a better job if they, too, like KRA were given tax collection targets based on the estimated monies lost in shadowy business practices.

This proposition is backed by KRA’s admission that there is a likelihood of missing the annual collection target of about Sh20 billion for the Railway Development Levy, which is pegged at 1.5 per cent of imported goods although the country’s imports stood at Sh1.6 trillion last year—translating to Sh24.2 billion.

Analysts are concerned at the prospect that the Government may be forced to look for other sources of revenue or divert money from other vote heads to repay the funds borrowed to build the Standard Gauge Railway (SGR). The concerns are based on the often repeated assertions that the taxes Kenyans pay are higher than those paid by their peers at the same level of development. Worse, are the widespread feelings among a cross-section of Kenyans that they do not get value for money.

While Customs integration with the Kenya Bureau of Standards (Kebs) mandated PVoC programme is welcome as it is expected to improve revenue collection, analysts may be forgiven for arguing that the collections would be higher were the latter agency given a separate target.

This is particularly important given Kebs’ introduction of new Import Standardisation Mark (ISM) last September which was meant to stem widespread counterfeiting of the old ISM by unscrupulous importers. The new ISM, unlike the old one, has security features supported by track and trace technology. This gives Kebs the ability to account for every sticker found in the market.

The result is that rogue importers of uncertified and untaxed goods will be locked out of business unless they continue their nefarious activities with support from Kebs and other tax collection agencies.

Other State bodies whose work might benefit from having set annual targets are anti-counterfeit and intellectual property (IP) agencies. It is not clear how much ground has been covered since last June when Industrialisation and Enterprise Development Principal Secretary Wilson Songa revealed it required institutional reinforcement for the agencies to fight the scourge.

But the continued complaints by major industrial companies of proliferation of counterfeit goods in the market and artists’ lamentation that they have less than three days’ head-start to sell their productions before counterfeiters get into the act may be taken to mean little has been done.

This is unfortunate because counterfeiting creates a parallel untaxed and unregulated economy outside the main one that produces or imports certified goods that are taxed. But even, worse, counterfeit goods usually do not give the buyer value for money and their distribution channels lend themselves for use by terrorists and other criminal gangs.

Needless to say, this poses huge security threats while also undermining the country’s employment policies in instances where the goods are imported. The hope, therefore, is that those in authority will wake up and smell the coffee; build the institutional capacities of these agencies whose needs have until now been put on the back-burner and give them realistic targets based on the estimated monies lost in the vices.

It may be worth noting that the private sector players could be persuaded to contribute human and financial resources to the fight against the vices because they are also adversely affected.