Mystery of fourfold rise in uncollected Sh1.6 trillion taxes
The Kenya Revenue Authority (KRA) has failed to collect Kes1.601 trillion as at June 2021, a fourfold jump in outstanding debt from Kes415 billion three years’ prior at a time Kenya, East Africa’s giant economy, is struggling to raise revenues from new tax measures.
The taxman was at a loss explaining to the National Assembly Public Investments Committee on Commercial Affairs chaired by David Pkosing (MP., Pokot South) which sought answers after audit queries revealed KRA failed to collect taxes on several corporates even after it raised tax claims, conducted audits and issued agency notices.
The taxman said it was in the process of validating taxpayers’ data to confirm the debts and rolling out a debt module on iTax to streamline outstanding collections.
The auditor-general raised several queries on why KRA had failed to collect outstanding taxes including from a leading Chinese contractor, an independent power producer, a British soft drinks maker and the vast estate of the late Gerishon Kirima.
KRA also raised additional tax assessments from audits on a local and international logistic companies as well as Kenyatta hospital but failed in the most critical task: following up on the collections.
The audit report tabled before the PIC shows, for instance, KRA carried out an in-depth audit assessments on some large tax payers and raised additional tax totaling Kes2.1 billion.
After taxpayers’ objections, the authority and taxpayers’ agreed on additional tax assessment totaling Kes807 million in which the taxpayers remitted Kes69.4 million leaving a debt of Kes738.3 million that has not been collected to date.
“The debt has also not been transferred to debt unit for collection. Similarly, the raised additional taxes have not been recorded in taxpayers’ ledger accounts. The additional assessments are off book transactions and are omitted from the debt portfolio of the Oil, Transport and service sector,” the report reads in part.
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In 2019, when the debt still stood at Kes415.2 billion, the taxman told the auditor that it was still validating the balances and would make recommendations to the National Treasury to possibly write off the uncollected sums.
The next year the outstanding debt more than tripled to Kes1.4 trillion with the taxman stating the exercise of validating the debt is on-going and various strategies have been implemented with a view of reducing the debts.
“The strategies implemented include enhanced recovery of debt revenue, undertaking taxpayer’s leger corrections and reconciliations, reversal of erroneous penalties and interests and processing of tax waiver Report of the Auditor-General on Kenya Revenue Authority – Revenue Accountability Statements for the year ended 30 June, 2020,” the report reads.
By 2021, these efforts had not yielded much and the taxman was now owed Kes1.6 trillion even as it said it was embarking on enhanced and comprehensive data cleaning and validation processes on taxpayers records, automation and roll out of debt module in iTax to transform the overall debt processes, establishment of a full time project team to fast track debt validation of legacy system debts, and strengthening of the tax appeal processes.
KRA is also struggling to process refunds where taxpayers have overpaid, with the taxman’s debt rising from Kes54.6 billion in 2018 to Kes109.8 billion as at June 2021.
The Authority said it was conducting institutional re-organisation including getting additional staffing for the refunds unit, ensuring timely resolution of system challenges and seeking for enhanced funding from the National Treasury for payment of approved claims.