70pc of Govt suppliers not VAT compliant – Tax expert

March 6, 2017
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PKF Kenya Tax Expert Michael Wambugu says KRA needs to increase the level of compliance from the current 42 per cent to 70 per cent like those of developed countries if it is to attain its target/FILE

, NAIROBI, Kenya, Mar 6 – Increasing the level of tax compliance will be the driver of Kenya Revenue Authority’s collections as it seeks to meet it’s Sh1.7 trillion target for the 2017/2018 budget.

This is according to tax experts from PKF who do not see any increment of taxes in the upcoming budget.

PKF Kenya Tax Expert Michael Wambugu says KRA needs to increase the level of compliance from the current 42 per cent to 70 per cent like those of developed countries if it is to attain its target.

He says major compliance should be from firms that do business with the government with 70 per cent of government suppliers not complying with VAT.

KRA has continued to miss its target despite increasing revenue collection and increase in taxes.

“KRA has done a tremendous job in enhancing tax collection, with launch of iTax that has seen more people enter the tax bracket, however more needs to be done if we are to realise our target in the next financial year. We are at 43 per cent tax compliance, if we increase this by 20 per cent, we could generate even more than the next year’s target,” he noted.

To increase revenue collection, Wambugu is hopeful that the new taxes on betting could be a great contributor.

“Though we are yet to get it right, this has to be a priority for Treasury and KRA for them to come up with working laws that will see this implemented,” he added.

Other taxes that should be looked at as the budget day nears include fast tracking the review of income tax with new realities that include electronic businesses; the review should also indicate how to net taxes on digital economy like Uber.

The taxman once again failed to meet the half-year target by Sh20 billion, after collecting Sh623 billion against the set target of Sh643 billion.

According to a Treasury document that was submitted to Parliament, by the end of December 2016 total cumulative revenues including Appropriations in Aid collected amounted to Sh674 billion against a target of Sh701 billion. In total, government revenues fell short by Sh27 billion, including KRA collections and Appropriations in Aid, which is income from State departments and agencies.

Pay As You Earn (PAYE) collection missed the target by Sh17 billion, to Sh144 billion from formal workers in an economy that experienced job cuts in the private sector, as well as a freeze in employment in government.

Labour actions will also greatly affect the PAYE moving forward.

The government is projecting to collect Sh1.7 trillion in revenue for the 2017/2018 financial year against a record budget of Sh2.62 trillion.

In a briefing to the Cabinet, Treasury CS Henry Rotich said donor commitments have been firmed up and disbursements are expected to hit Sh256 billion in loans and grants.

Rotich has said the 2017/2018 budget will continue to focus on the 2nd Medium Term Plan of Vision 2030 and the government’s priorities.

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