The Departmental Committee on Finance and National Planning this morning kicked off a 2-day engagement with the Kenya Revenue Authority (KRA) at Simba Lodge Naivasha .

The Committee which is mandated to consider matters in relation to public finance is keen to understand the strategies the Authority has laid down to meet its revenue targets for the current financial year and the 3 trillion projection for the Financial Year 2023/2024.

The Committee also wants to get acquainted with the performance of various excise duties in the Finance Act as well as get appraised on the tax exemptions and waivers approved and issued by Kenya Revenue Authority in the last 5 years. 

Speaking during the opening session of the engagement retreat this morning, the Authority’s Chairperson, Mr. Anthony Mwaura told the Committee that his new board had embraced a different trajectory from the previous board’s and are now adopting negotiations on payment plans rather than closing down businesses of tax defaulters. Mr. Mwaura also told the Committee that the Authority had intensified stakeholder engagements to encourage the enrollment of new taxpayers.

Committee Chair Hon. Kimani Kuria (Molo) was however quick to caution KRA on this route. He observed that if KRA adopts this methodology to collect taxes, then they would not manage to net their targets.

“If you make tax payment too much of a conversation, who will pay taxes? he posed.

The Committee also heard that KRA is also rolling out a Program to introduce physical tax booths to promote the enforcement of compliance. The acting Commissioner General Ms. Rispah Simiyu noted that towards this end, KRA has plans to deploy Revenue  Service Assistants. 

She further informed the Committee that the Authority had developed a strategy to encourage compliance on the monthly rental income tax. She noted that if the plan succeeds, the authority would have succeeded in onboarding a number of new taxpayers hence expanding the tax base. 

“Mr. Chairperson, we are asking ourselves whether high taxes always lead to high revenue, and the answer is no. We shall therefore be considering a reduction in rental tax to upscale compliance.”, explained Ms. Simiyu.

Members led by Kitui Rural MP, Hon. David Mwalika Mboni supported the move noting that the higher rate of rental income tax had encouraged non-compliance denying KRA the much needed revenue. 

KRA officials also informed the Committee that they had implemented taxation at source with regard to digital service tax to enhance revenue generation from online transactions. 

Members however took the authority to task to explain the discrepancy in statistics cointained in reports of China- Kenya trade.

This follows a recent case where Kenya reported that it imported Sh377.5 billion from China in the 10 months period ending in October 2022.

China on the other hand had reported that its exports to Kenya over the same period at Sh809.4 billion, leaving over Sh. 400billion discrepancy that has not been explained by the Kenya Revenue Authority.

In KRA defence, the acting Commissioner, Customs and Border Control, Ms. Pamela Ahago attributed the discrepancy to transit goods recorded as goods destined for Kenya. 

At the same time, KRA Chairman Mwaura has clarified that the Authority has not scrapped any tax reliefs, after lawmakers sought clarification following recent media reports that it had suspended all tax relief payments. 

Mr. Mwaura told the Committee that KRA had only suspended all tax relief payments effective February 28 until further notice.

“We only suspended all tax relief payments to allow for review after we realised that some of the beneficiaries did not deserve. The ongoing review is also aimed at increasing the impact of tax expenditure on economic growth”, the  KRA Chair stated. 

Members however warned the KRA Board against usurping their powers to enforce laws and regulations not approved by Parliament.

“You can only implement a law which has been enacted by Parliament or a regulation after the House has given it a nod,” warned Hon. Kuria.

The engagement is expected to enlighten the Committee on the Domestic Taxes operations, customs and border control operations , excise duty performance as well as tax reliefs and incentives. The Authority is also expected to apprise the Committee on various tax laws challenges in court and any legislative interventions that the Committee can facilitate to help KRA execute its mandate effectively. 

Among the policy measures that KRA is proposing to help achieve the 3trillion target include the review of the VAT regime, introduction of Pay As You Earn (PAYE) new band - reducing the minimum annual threshold and personal relief, increasing non- resident dividend rate to 20% and the harmonization of the rate of Import Declaration Fee (IDF) at 2.5% and the Railway Development Fund (RDL) at 2%.

 KRA is also proposing to increase advance tax from 2,400 to 5,000 per year and to increase excise duty on betting, lotteries, gaming, and prize competition from the current 7.5% to 20%.

The Committee engagement with KRA continues tomorrow.