KRA lists measures to stop tax evasion among the rich

Monday, June 14th, 2021 00:00 |
Treasury Cabinet secretary Ukur Yattani. Photo/File

Steve Umidha @UmidhaSteve

Kenya Revenue Authority (KRA) has announced plans to deploy advanced technologies, train more tax and customs professionals as it seeks to deal with sophisticated tax evasion tactics of the rich and dodgy corporates.

This comes barely days after Treasury Cabinet Secretary Ukur Yatani in his 2021/22 fiscal budget armed the taxman with new responsibilities to help it get “difficult” taxpayers to pay their fair share of taxes.

In the Finance Bill 2021 and the proposed National Tax Policy Framework, Yatani wants to empower KRA to seek help from other authorities for tax collection and tax legislation.

One of the immediate targets of the above-mentioned will be to deal with the headache of collecting the controversial Digital Service Tax – an avenue believed to be used by companies running online services to obscure the taxman.

“I have initiated a process of developing a National Tax Policy Framework that will not only enhance administrative efficiency of the tax system but provide consistency and certainty in tax legislation and management of tax expenditure,” said Yatani in his budget speech last Thursday.

Adding that, a draft National Tax Policy is now ready and with plans afoot to share the document with stakeholders and allow for public participation before it is presented to the Parliament for debate and possible approval.

KRA randomly audits returns in an effort to catch tax cheats and measure evasion – but such reviews turn up very little evidence of evasion among the extremely wealthy, in part because the rich and certain firms use highly advanced accounting techniques to dodge the taxman nets. 

Offshore tax shelters

In some instances, multinationals use offshore tax shelters and pass-through businesses as a means to avoid paying taxes, with ever-evolving technology also proving to be a contest for the authority.

A pass-through business is a sole proprietorship, partnership, or a corporation that is not subject to the corporate income tax – instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates. 

As a result, through its training department, Kenya School of Revenue Administration (KESRA), the tax agency says it has advanced talks with Kenya Institute of Curriculum Development to develop a syllabus, personalised on tax education whose expectation is to introduce the plan into the country’s education system.

“Those talks are on course, and besides plans to modernise our systems, we believe tax programmes should be incorporated in our education system as early as in Grade 4 all through to our secondary schools.

This will complement our already existing training programmes centered on tax and customs administration, fiscal policy and management,” said Commissioner and Head of KESRA, Fred Mugambi in an exclusive interview with Business Hub.

Mugambi said that such initiatives would help improve the technical expertise of tax experts at the Times Tower.

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