KRA Headquarters in Nairobi (PHOTO: Wilberforce Okwiri)
The Kenya Revenue Authority (KRA) has pinned hopes on new taxes and waivers introduced this month to shore up revenues in an economy hit hard by the Covid-19 pandemic.
KRA missed its tax collection target by over Sh186 billion since March, when the virus was first reported in Kenya, according to the taxman’s data for the eight months to November 2020.
The beginning of this month saw KRA roll out the minimum tax, digital services tax and the Voluntary Tax Disclosure Programme (VTDP), where taxpayers get relief on penalties and interests on undisclosed taxes dating back to July 2015.
Wanja Wang’ondu from the Domestic Taxes Department, yesterday defended the new taxes, noting that they will up revenue collection. “There’s no right time to introduce a tax. But with time, people embrace and cope as they understand the tax,” she said.
Ms Wang’ondu also sought to clarify claims the minimum tax was a “business killer” terming it an “equaliser” that would ensure both profit and loss-making businesses contribute to the tax kitty.
The rate of the minimum tax is at one per cent of a firm’s gross turnover. It runs concurrently with the instalment tax which businesses normally pay on the 20th day of the month at the end of every quarter.
“For instalment tax, businesses project tax payable and make payments when having a profit and no tax payable when they record a loss. That’s why minimum tax has come in regardless of a profit or loss,” she said.
“There’s quite a number of entities that have not been paying income tax that will now be paying, there’s an expected rise in tax revenue,” added Wang’ondu.
Since the two-run concurrently, the payable tax will be the higher one. “There’s no quarter that a taxpayer will pay both,” said Ms Wang’ondu.
She noted that taxable losses mostly arose from investment deductions where a business may be making profits but investing heavily on capital items.
Persons exempted from income tax are also exempted from the minimum tax. These include employment income, rental income, businesses under extractives and those registered under turnover tax.
The VTDP will run up to December 31, 2023. Wang’ondu noted increased interest in the programme.
“Those who make the full payment this year will get 100 per cent relief in penalties and interest, while those who pay next year and in 2023 will get relief of 50 per cent and 25 per cent respectively,” said Wang’ondu.
The digital service tax is charged at 1.5 per cent of the gross transaction value.