The following tax reforms will be implemented to raise resources to finance government programmes and meet the fiscal deficit targets:
- Integrated Tax Management System (ITMS): The second phase of the implementation of ITMS will ensure that a wide range of electronic services will be availed including electronic filing and registration, electronic payment, electronic taxpayer accounts, core internal modules covering compliance, audit, debt and refund, incorporation of road transport department’s functions into ITMS and electronic tax register data transmission. The system will enable large and medium taxpayers make online filing of their returns as well as online payments. It will also reduce the frequency of payments made in a year and thereby improve Kenya’s ranking as a preferred investment destination in the World Bank’s Doing Business ranking.
- Payments of Taxes via Mobile Money: Common Cash Receipting System (CCRS) as a common revenue collection platform in KRA will be enhanced and rolled out to cover all business systems. In addition, CCRS will be fully integrated with CBK and appointed commercial banks for seamless flow of revenue collection information. CCRS will be enhanced to incorporate electronic payment of taxes (e-Pay) and mobile banking.
- Turnover Tax: The Turn over tax will be revamped to make it more efficient and easy for the taxpayers to comply with. A sector specific taxpayer education programme as well as an expanded scope of electronic payment will be implemented to increase recruitment and registration of taxpayers and revenue collection.
- Taxation of Real Estate Sector: KRA will put in place new information technology called GEOCRIS that uses geo-spatial information to locate property and track landlords to pay rental income.
- Taxation of High Net Worth Individuals (HNWIs): KRA will enhance its strategy to identify and tax HNWIs and work with other jurisdictions through tax information exchange agreements to conduct joint audits of HNWIs.
- Single Customs Territory: Implementation of Single Customs Territory (SCT) and introduction of tax payment at first point of entry requires that Customs Services Department (CSD) develop an optimal revenue sharing agreement formula with partner states. The CSD will: strengthen the computerised systems to reduce cost of doing business and ensure timely disbursement of revenues; separate policy and oversight functions from implementation roles through addressing the non-trade barriers (NTBs) that may inhibit free movement of trade; undertake audit visits to partner states in order to increase governance in revenue management; and also train CSD staff on SCT procedures and structure.
- Dynamic Risk Management System: A wide Dynamic Risk Management System (DRMS) will be developed, implemented, and integrated with all relevant KRA systems to target resources for higher end activities and facilitate increased efficiency.
- Implementation of Electronic Cargo Tracking System (ECTS): Multi-vendor ECTS will be completed and rolled out to allow other service providers to come on board. In addition, the system will be integrated with other regional authorities electronic cargo systems to ensure seamless monitoring of cargo throughout the region.
- Transfer Pricing: To prevent loss of revenue and foreign exchange through transfer pricing the Authority will review the governance structure of the transfer pricing programme, enhance the transfer pricing risk assessment, implement an alternative dispute resolution strategy, build up the Authority’s third party information base and sources and strengthen tax information exchange agreements and partnerships.
- Implement the strategy for taxation of mining sector: The increasing activities in the mining sector are a pointer to the potential of the sector to contribute substantially to the economy and government revenue. This follows the recent discovery of various mineral resources in the country. KRA will put in place the requisite mechanisms and framework to collect increased revenue from this emerging sector.
- Review of Revenue Acts: Several revenue statutes will be repealed to provide a wider scope for revenue enhancement. In particular the Value Added Tax Bill will be tabled before Parliament for enactment.
- County Taxation: KRA will re-organize its regional structure in a manner that will bring services closer to Kenyans and position itself for the expanded role of assisting County Governments in collecting County revenue.
- Strengthening and Revamping Tax Enforcement Mechanisms: KRA will revamp enforcement strategy to address cyber crimes and other information technology related frauds to safeguard revenue and enhance compliance. Key initiatives to be undertaken include:
- Implementation of automated risk-based audit across all tax heads with automated selection and flagging of compliance risks;
- Overhaul of the electronic tax register (ETR) system. The focus is on electronic linkage between the ETRs and the ITMS to allow for automated population of taxpayers’ accounts and electronic monitoring of non-compliant taxpayers;
- Expanding mandatory reporting requirements for business, professionals, barter exchange income, broker transactions, non-employee compensation, real estate transactions, rent and sale of securities;
- Enhance use of enforcement tools including scanners, boats and ECTS;
- Use of automated third party information to increase potential for detection of non-registered taxpayers;
- Increasing the range of transactions for which the personal identification number (PIN) will be required as a means of increasing the potential for detection;
- Implementation of Phase II of Valuation Database covering exports and other customs regimes to detect under-valuations;
- Enhance Investigations and Enforcement Department’s capacity to tackle cyber crime and IT related fraud; and
- Ensure full implementation of the referral guidelines.
