7th April 2016: KRA moves to plug tax leakage loopholes

Kenya Revenue Authority head office at Times Tower in Nairobi. PHOTO | FILE  

Summary

• KRA has created a special department to monitor its employees’ engagement with taxpayers to plug leakage loopholes.
• The department will handle integrity issues arising within and from outside the agency for direct reporting to Commissioner- General John Njiraini.

The Kenya Revenue Authority (KRA) has created a special department to monitor its employees’ engagement with taxpayers in a move that aims to plug the many holes through which it loses billions of shillings in tax leakage.

The department, to be headed by a Deputy Commissioner for Ethics and Intelligence, will handle integrity issues arising within and from outside the agency for direct reporting to Commissioner- General John Njiraini.

KRA said the head of the department is expected to establish processes that promote ethical behaviour among staff for purposes of improving revenue collection.

“The main purpose of this job is to develop and implement strategies and mechanisms for promoting ethical behaviour between staff and taxpayers, leading to increased revenue collection and appropriate branding of the authority,” KRA said.

General oversight and execution of KRA’s integrity action plan was previously delegated to the Commissioner for Support Services, working with the Deputy Commissioner in-charge of operations in the Commissioner-General’s office.

The Commissioner- General currently chairs KRA’s Apex Corruption Prevention Committee and drives the integrity strategy.

Creation of the new docket comes just months after President Uhuru Kenyatta ordered a lifestyle audit on KRA employees as part of fresh efforts to stop rampant corruption in the agency that costs the State billions of shillings in revenue leakages every year.

“Measures geared towards eradicating corruption in tax collection must be implemented. Towards this end, I am directing the National Treasury to work with the KRA board to ensure speedy implementation of an appropriate staff vetting framework,” Mr Kenyatta said in October during a KRA Taxpayers Award ceremony.

READ: Uhuru orders lifestyle audit for KRA staff

The integrity of some KRA officials has come under scrutiny for suspected collusion with corrupt individuals to evade tax, leading to revenue shortfalls.

The move also comes two weeks after KRA and Equity Bank officers were arrested and charged in court for running a tax evasion syndicate in which traders at the Namanga border post were aided to import goods without paying duty, denying the tax man more than Sh120 million.

KRA said investigations had revealed that 2,926 transactions worth Sh123.58 million and involving 916 taxpayers were initiated in the online clearance portal, Simba 2005, without corresponding dealings in the bank’s system to confirm actual payment.

The forensic audit showed that the traders used fake bank slips to guarantee passage of their cargo even though no money was deposited into the Equity Bank account.

KRA is presently struggling to grow its revenue collections in the middle of massive leakages that have interrupted the government’s budget plans.

Treasury data shows that the KRA is likely to miss its full-year collection targets after collecting Sh687 billion with just four months to the end of the fiscal year.Collections in the eight months to February left the tax man with a deficit of Sh527.88 billion against a target of Sh1.21 trillion for the year to June, continuing the series of target shortfalls from the successive quarters.

The tax man missed its half-year tax revenue targets by a massive Sh47.6 billion saddled by a decline in payroll taxes and delayed application of the Excise Duty Act 2015.

The taxman closed 2015 with a huge shortfall in ordinary revenue collection made of a Sh26 billion deficit in Pay-As-You-Earn (PAYE) revenue and a Sh15.9 billion shortfall in Value Added Tax (VAT) collection from imports.

As part of the fight against tax leakage, KRA targets to upgrade cargo scanners in all the main ports of entry and install additional ones.

The taxman said the existing scanners would be upgraded to provide sharper image quality and boost their speed and detection capabilities.

The targeted new scanner systems will have an interchange with KRA’s supervision centre and the government’s current customs business system.

KRA introduced scanners as part of a wider strategy to curb tax cheats who often made false declaration of goods for processing.

The tax man says in its strategic plan for 2015/16-2017/18 that it is also relying on electronic tracking of cargo to beat tax cheats. KRA says the system is expected to attain 100 per cent coverage by 2018 from 23 per cent presently.
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