Kenya: KRA change tact to nab stamp duty and ETR tax cheats
22 April 2013
The taxman has issued new excise duty stamps starting this month as one of the measures to curb increasing tax evasion.
The Kenya Revenue Authority said that counterfeit stamps have become common, costing it significant amounts in revenue loss. It has yet to quantify revenues lost annually through counterfeit stamps though. Commissioner General John Njiraini said it is developing a ‘track-and-trace’ back-end system to support field surveillance of stamps usage.
“The system will be able to tell the difference between fake and genuine stamps with almost 100 per cent certainty…. The issue of counterfeit stamps is quite prevalent but we will now follow up to get the real culprits,” he said.
A team of 50 staff will be dispatched to monitor the market on ground and using the system, and will be increased to 300 within three years. KRA said domestic excise duty collection is also under-performing owing to a shift in consumption patterns for beer and cigarettes.
“Consumption of beer and cigarettes is moving from brands with higher tax rates to brands with lower or zero tax rates, such as Keg,” Njiraini said.
He said the agency will install a production-line technology to eliminate under-declaration, initially roping-in cigarette manufacturers. Beer makers will then be targeted and eventually the whole drinks and beverages industry, including bottled water. Implementation of the first two phases of the new excise tax management system will be complete before end of May.
KRA has also noted discrepancies in VAT performance, with collections from large taxpayers rising only by 0.6 per cent to Sh35.7 billion in the nine months to March. The medium and small taxpayers segment recorded a 26.1 per cent growth in VAT in the same period.
“We are investigating several incidences of invoice trafficking for the purpose of supporting VAT input claims. One case is complete and we will be moving to court shortly,” said Njiraini.
KRA will start tracking ETR machines remotely to get real time data on VAT from points of sale. Monitoring ETRs is at present manual, creating loopholes for tax evasion.
“We expect to have all ETR devices GPRS-enabled within the 2013/14 financial year,” he said.
Njiraini also hopes Parliament will “give priority” to enacting the pending VAT Bill whose delay he said is costing KRA about Sh11 billion, besides fuelling a build-up in VAT refund claims.
KRA is also interlinking its new system for handling electronic declarations for domestic taxes, dubbed iTax, with 20 banks for the start. It hopes to interlink with all banks by July.
“We are discussing how to ensure rapid uptake of the system by taxpayers… there is no reason why some taxpayers file returns manually,” he said, hinting at making use of the system mandatory.
The iTax system has the capability for electronic payment, eliminating the need for taxpayers going to Times Tower to remit.
Source: The Star, Kenya