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The Kenya Revenue Authority (KRA) has been allocated additional cash to hire 1,000 intelligence and enforcement officers who will identify and arrest wealthy tax cheats in what promises to be the biggest crackdown on high-networth individuals who owe the taxman.
Parliament’s Budget and Appropriations Committee on Tuesday evening asked the Treasury to provide an additional Sh2 billion to enable the taxman hire more employee. The bulk of the additional staff will be tasked with investigating rich people’s sources of income and their expenditure against their tax remittances, sources at KRA said. Some will work on intelligence reports to seek recovery of unpaid taxes with the additional staff being given a target of raising Sh50 billion in the period ending June next year.
“Increase Sh2 billion to the Kenya Revenue Authority budget for recruitment of an additional 1,000 officers countrywide in order to generate an additional Sh50 billion in revenue in support of the achievement of this year’s revenue targets,” said the National Assembly committee.
The additional KRA staff will also step up the analysis of companies’ financial dealings, especially firms doing business with the national government and counties, to unearth tax cheats by matching their payments and income declared to the authority.
The committee’s recommendations are contained in the report reviewing the supplementary budget where it has cut the extra funding the Treasury had requested for the 2019-20 financial year, saying the State’s revenue collection will fall short of forecasts.
In mid-November, the Treasury had requested a Sh86.6 billion or three percent rise in spending for roads, health and projects to support the manufacturing sector, a priority under President Uhuru Kenyatta’s Big Four Agenda. However, the committee slashed the amount to Sh49.8 billion and now wants the KRA to step up tax collections in an environment where the taxman is struggling to meet targets due to lower corporate profits and job cuts.
Now, the budget committee wants KRA to focus on tax cheats to plug the revenue shortfalls. The committee said the government’s revenue collection performance for the 2019-20 financial year, which ends in June, may fall short by about Sh120 billion to stand at Sh1.7 trillion. MPs’ directive to Treasury comes weeks after KRA told Parliament that the surveillance of the rich and companies had revealed the potential to collect Sh250 billion that remains unremitted to the taxman.
An 1,000 additional staff is equivalent to 12.5 percent of KRA’s total workforce that stands at 8,000 currently. Once hired, they are expected to collect at least a fifth of the unremitted billions between January and June.
“The new hirings have been part of the plan because as we get the intelligence from data analysis and whistle blowers, we need to fast-track the real catching of the tax evaders,” said a top KRA official who asked not to be named.
The crackdown on tax cheats also follows an order from Mr Kenyatta in November last year for KRA to keep a watch on high net-worth individuals whose lifestyles are not in tandem with the taxes they pay. So far, big names like tycoon Humphrey Kariuki and the owners of Keroche Breweries — Joseph and Tabitha Karanja — have been charged in court, where they are facing accusations related to alleged non-payment of taxes running into tens of billions of shillings.
KRA’s enforcement unit has been using various databases to pursue suspected tax cheats, including bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority (KCCA), which reveals individuals who own assets such as aircraft. Car registration details are also being used to smoke out individuals who are driving high-end vehicles but have little to show in terms of taxes remitted. Kenya Power meter registrations are also helping the taxman to identify landlords, some of who have been slapped with huge tax demands.
The taxman has in recent months been seeking details of suppliers and contractors hired by county governments in the quest to tighten the noose on individuals and firms evading tax. KRA says a sharp increase in imports of the luxury goods and multi-million-shilling investments in real estate have opened its eyes to a potentially massive tax leakage, which if tapped could yield billions of shillings in additional revenues to the Exchequer. The argument is supported by the fact that only a few Kenyans have officially registered as belonging to the high-income earners’ bracket despite the massive growth in conspicuous consumption, especially in Nairobi.
The authority has hired a team of auctioneers to help it track properties of individuals and companies who have failed to pay the taxes due. Cars, land, homes, office blocks and work place equipment will be on the KRA radar. Among the individuals and companies to be targeted are those that have lost disputes against the KRA in court or at the tax tribunal.