The Kenya Revenue Authority (KRA) will start receiving real-time data on traders’ daily sales following the publication of a new law that allows the taxman to monitor transactions using Internet-enabled electronic tax registers.
The new regulations published by Treasury Cabinet Secretary Ukur Yatani on Friday require businesses to install new electronic tax registers connected to the KRA’s systems, escalating the war on tax cheats.
All businesses that have an annual turnover of at least Sh5 million are by law required to have electronic tax registers.
Under the new system, the KRA will receive sales and invoice data from all registered companies and traders on a daily basis in a fresh push to boost revenue collections and curb tax evasion.
“A register shall be capable of integrating with the authority’s systems,” Mr Yatani says.
“It shall be capable of transmitting to the authority’s system the tax invoice data and the end of day summary of the respective day’s data in the manner specified by the Commissioner.”
The new technology is expected to deepen scrutiny of traders’ transactions.
The move comes as the taxman, who has perennially missed tax targets, moves to seal revenue leaks against the backdrop of revenue shortfalls due to coronavirus-related disruptions.
As part of the reliefs introduced to cushion the economy against the effects of the Covid-19 pandemic, the government also cut the corporate and personal income tax rates in April to boost demand and help firms keep workers on their payrolls.
Revenue collection underperformed by Sh40 billion in the first two months of the financial year, July and August, prompting increased borrowing to make up for the shortfall.
But the Treasury is racing to bring more people into the tax brackets and rein in cheats to grow revenue collections in an economic setting that is unlikely to see duty payment grow amid subdued sales and lower profits.
Businesses will be expected to have installed the new electronic tax registers connected by September next year.
Traders will also be required to seek the taxman’s permission to perform any other business the next day under the system, meaning incorrect or incomplete data logged the previous day could lock them out.
The KRA will also start receiving real time data on motor vehicle purchases, property deals and real estate investors seeking electricity meters after integrating its system with other agencies.
The taxman is integrating its system with third parties like Kenya Power, the National Construction Authority, the National Transport and Safety Authority and other agencies for speedy access to data on taxpayers’ spending patterns.
Car purchases, construction contracts and register of landlords seeking electricity bill meters for their premises will be viewed instantly by the taxman, removing the hurdle of making requests to third parties for the information.
The KRA wants to match spending by wealthy Kenyans with the income they have declared in its new strategy aimed at unearthing individuals whose lifestyles are not in tandem with the taxes they pay.
Luxury items
The taxman says a sharp increase in imports of luxury items and large investments in real estate has revealed a potentially massive tax leakage, which if tapped could yield billions of shillings in additional revenues to the Exchequer.
Only a few Kenyans have officially registered as belonging to the high-income earners’ bracket despite the massive growth in conspicuous consumption in areas such as Nairobi.
A tie-up with the National Environment Management Authority will reveal individuals seeking regulatory nod from the watchdog for mega projects, which would reflect their financial muscle.
Data from the Kenya Civil Aviation Authority will reveal individuals who own helicopters and light aircraft.
Instant car registration details will be 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.
Kenya is known to have a large group of super-rich individuals, who have hidden their wealth in trusts and a web of companies so as to evade taxes.
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