KRA starts tax returns audit to nail cheats

The Kenya Revenue Authority (KRA) is reviewing firms’ and workers’ annual income tax returns for unpaid duty, stepping up a crackdown that could see more tax cheats prosecuted.

The taxman’s intelligence and enforcement unit is investigating workers’ and businessmen’s sources of income and their expenditure against their tax remittances.

The audit involves matching the returns with other databases including import records, cash trail in bank accounts, motor vehicle registration details, Kenya Power data and supplier dealings.

Firms and individuals doing business with the government and counties and those that declare supplier contracts to the KRA are particularly on the taxman’s radar.

“Kenya Revenue Authority (KRA) is currently undertaking comprehensive compliance checks on all taxpayers,” said the KRA in a notice.

“This may be done through tax returns review, comprehensive audits or investigations. The outcome of which may include additional assessments or in the case of fraud; prosecution of the offenders.”

Besides prosecution, tax cheats could see their personal identification numbers (PINs) disabled and risk having their cargo blocked at the Port of Mombasa, further hurting their ability to do business.

The Tax Procedures Act of 2015 allows the taxman to issue travel bans on suspected tax cheats, collect unpaid duty directly from suppliers and bankers of defaulters and prosecute those in arrears.

The KRA said it would notify the firms and individuals captured in the probe and offer them time to settle the breaches before punishment.

“The compliance checks may cover issues on Individual Income Tax (individuals or corporate companies), VAT, and Customs Duty, Excise, PAYE, Withholding and other taxes administered by KRA,” said the taxman in the notice.

Motor registration details are also being used to smoke out individuals who are driving high-end vehicles, but have little to show in terms of taxes remitted.

Kenya Power meter registrations are helping the taxman identify landlords, some of who have been slapped with huge tax demands. The taxman also seeks details of suppliers and contractors hired by county governments and companies in the quest to tighten the noose on individuals and firms evading tax.

Companies withhold and pay part of taxes on behalf of the suppliers, offering the KRA data on size of supply contracts and the people behind them.

The taxman is racing to bring more people into the tax bracket and curb tax dodging and evasion in the quest to meet revenue targets that it has persistently missed in recent years.

Its revenue target for the year starting July is Sh1.621 trillion amid economic shocks that look set to complicate its efforts.

The KRA has already sent a notice of enforcement to those who have accepted their tax liability and are yet to settle.

The enforcement actions include asset seizure, property auction and disabling of PINs.

Should the KRA make good its threat to deregister the PINs, the affected individuals and businesses will be cut off from making transactions that require proof of active registration as a taxpayer.

The list of transactions that requires proof of an active PIN certificate includes registration of land titles, approval of development plans, registration, transfer and licensing of motor vehicles and registration of business names and companies.

Others are underwriting of insurance policies, customs clearing and forwarding, payment of deposits for power connections, supplying goods and services to the State, as well as opening accounts with financial institutions.

Employers would also be committing a crime if they wire salaries to the accounts of workers whose PINs have been deactivated. The crackdown follows an order from President Uhuru Kenyatta requiring the KRA to watch high net-worth individuals whose lifestyles are not in tandem with the taxes they pay.