Introduction
Kenya Revenue Authority (KRA) is the central government agency mandated with collection of the national taxes.
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(Photo by Waka)
The authority is also mandated with the implementation of all national taxes in Kenya. For that, KRA is paid a commission. In recent times, the National Treasury has proposed expanding KRA’s mandate to collection of revenue for some of the 47 counties.
KRA’s Systems
Over the years, KRA as a corporate body has developed systems that can easily be integrated with the activities of various organizations. KRA has technical and personnel skills and resources that are available to other organizations for hire.
For example, the pay as you earn (PAYE) system can easily be integrated with the National Social Security Fund (NSSF) and the National Health Insurance Fund (NHIF) systems.
This is because PAYE, NSSF and NHIF use same employment data for compliance in the case of employed persons. However, NSSF and NHIF also has unemployed members whose data is not available in KRA.
KRA’s Agency Services to other Organizations
Nevertheless, over the years KRA has attempted to forge alliances with NSSF and NHIF without much success. The alliances have not succeeded for one reason or other. It is noteworthy that these alliances have been purely business initiatives.
KRA was expected to collect the member’s contributions and in return to be paid a commission. This was a private initiative between KRA and the other organizations.
However, KRA has been contracted by other organizations in Kenya to collect their levies on an agency basis. Some of the organizations that have contracted KRA are government organizations such as Kenya Bureau of Standards (KEBS) and Kenya Sugar Board (KSB) etc. These two organizations rely on data that is provided to KRA by business organizations tax purposes.
Proposed Expanded Mandate
In recent times, the National Treasury in a draft proposal to enhance collection of revenues at the county level has proposed that KRA should extend its services to some of the 47 county governments. The proposed counties are Kiambu, Machakos, Mombasa, Nairobi, Nakuru, Narok and Nyeri.
A close examination of these counties will reveal several factors that would inform the selection of the counties. These counties are among the most developed economically, the counties have high revenues, counties are relatively urbanized and counties have a relatively higher level of formalized structures.
Devolved governance through counties has been in existence in Kenya for about four years. Most of the counties do not have revenue administration capacity. They have weak dysfunctional structures inherited from the defunct city councils.
The numerous teething problems of the county governments and heavy reliance on the funding from the central government have resulted in laxity in revenue collection from the local sources.
Counties have numerous revenues sources which if managed well will give the counties adequate revenues to cover their budgets. Some of the most common revenue sources are property rates, entertainment taxes, parking fees, national park fees, market fees, businesses registration fees etc.
Extending KRA’s mandate to the county government may have been informed by the fact that the tax authority has the capacity and experience to collect the revenues for the counties.
This is in consideration that there are many KRA registered taxpayers who are based in those counties. In essence, KRA already has the data needed by the counties to boost their revenue collection.
What is the Effect on County Governments?
One of the effects is that the revenue collection will be streamlined and the hold that cartels have on county government’s revenues may diminish. Hence, the revenue departments may be scraped and this may result in the sacking of some people.
There may be increased revenue collections which may result in decreased revenue disbursements from the central governments. The county will also have to pay KRA a commission for collection the revenues.
What is the Effect on Taxpayers?
One of the significant effects on taxpayers is that more taxpayer’s information will be available to KRA. This may lead to demands for more tax payments. The other effect is that more persons may be brought onboard into the national tax net.
However, with the streamlined revenue collections, the taxpayers at the counties will be able to hold their counties accountable for the revenue use. This will happen only if the people at the county level are proactive.
Feel free to send us questions or topics on tax and investments in Kenya that you would wish to be covered in this Website.
Disclaimer
This post is for general overview and guidance and does not in any way amount to professional advice. Hence, www.taxkenya.com, its owner or associates do not take any responsibility for results of any action taken on the basis of the information in this post or for any errors or omissions. Kenyan taxpayers must always rely on the most current information from KRA. Tax industry in Kenya is very dynamic.
©Wakaguyu Wa Kiburi
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