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Kenya

Review of tax system to end this year

NAIROBI, Kenya Oct 21- The Government through the Ministry of Finance is set to complete a review of the country\’s tax system by the end of the current financial year.

This follows complaints from the public that the tax system is complicated which has seen many people shy away from paying their taxes.

Making the announcement, President Mwai Kibaki said the review would improve revenue collection and simplify tax administration with a view to expanding the tax base and improving compliance.

"KRA has implemented various tax reforms. Although these reforms have measurably improved revenue collection and tax administration, more still needs to be done," President Kibaki said.

The review is to be followed by legislative and institutional reforms that are likely to close the tax gap.

The president\’s sentiments come at a time the Kenya Revenue Authority (KRA) is looking at widening its tax net. During the first quarter of the 2010/2011 financial year, the taxman saw 153,359 new taxpayers added into its books.

The review, it is hoped, will simplify the revenue collection process compelling more people to pay their taxes.

President Kibaki also revealed that work had begun on the development of a simplified Value Added Tax (VAT) legislation that would shorten the period for VAT refunds.

"It is expected that the first draft will be ready for discussion with stakeholders by the fourth quarter of this fiscal year," he said.

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This was one of the major tax reforms proposed in the budget speech by Finance Minister Uhuru Kenyatta.  Mr Kenyatta had said reforms in the VAT system were long overdue, as the current system had encountered severe challenges in administration.

Kenya uses the British model, which is considered to be relaxed and the review is intended to make it more aggressive and seal a number of loopholes.

President Kibaki was speaking during the seventh Taxpayers Awards Ceremony.

At the same time, KRA Commissioner General Michael Waweru put tax evaders on notice saying the authority would be more vigilant in dealing with them.

Mr Waweru said KRA had turned to using the Anti- corruption and Economic Crimes Act which carries with it stiffer penalties for those failing to pay their taxes.

"KRA takes the fight against tax evasion very seriously as the vice continues to place heavy burdens on compliant tax payers," Mr Waweru said.

The development of such measures would go a long way in enabling the government to improve its revenues collection through which the country has been able to fund 93 percent of its total expenditure.
 

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