NAIROBI, Kenya, March 7 – The Kenya Revenue Authority (KRA) is banking on the rollout of the electronic Tax Invoice Management System(eTIMS) to collect an additional Sh400billion in Value Added Tax(VAT) as it drives more taxpayers to be compliant.
The new system, currently in its pilot phase, is expected to facilitate compliance as taxpayers will be able to transmit electronic invoices at their own comfort through devices such as mobile phones, tablets, and laptops; they can also use invoicing systems or an online portal.
Through integration with eTIMS, businesses will benefit from real-time invoice transmission providing accuracy in tax invoice declarations and reconciliation between filed returns and payments.
The eTIMS system is also set to incorporate a Supply Chain Module (SCM) which will manage the taxpayer’s inventory thus providing visibility to taxpayer transactions from the point of acquisition to the point of sale increasing the compliance of taxpayers.
Speaking during a media sensitization forum on the system, the deputy commissioner for medium taxpayers at KRA, George Obel noted that the new system will fully address the issue of missing trader invoices and the issue of fictitious claims as all transactions will be visible to the taxman, thus increasing collections.
The version is set to complement the TIMS where businesses were expected to acquire internet-enabled tax registers (ETRs) which capture and send all real time transactions to the taxman.
Obel noted that they decided to roll out the new version after a number of taxpayers cited challenges in adopting TIMS due to the high cost of the ETRs which ranges from between Sh35,000-40,000.
“eTIMS has been rolled out to complement TIMS after we got to learn about challenges faced by taxpayers in moving to the new system. We want to facilitate compliance to tax requirements at a minimized cost,” he said.
As of March 6 2023, taxpayers on board TIMS were 67,954 against the 113, 239 active taxpayers. This means the balance of 45, 285 are targeted to onboard eTIMS.
The taxman rolled out the solution after a benchmark with Rwanda which has also adopted a similar solution and this resulted in an increase in VAT collection.
Kenya’s tax-to-GDP ratio is currently at 15.3 per cent with VAT accounting for 4 per cent, while Rwanda’s tax-to-GDP ratio is 16.9 per cent with VAT accounting for 7 per cent.
“Due to the progressive implementation of the Electronic Billing Machine(EBM) in Rwanda, there has been a significant growth in VAT collection, which currently represents the largest share of tax revenue. It is for this reason that KRA has embarked on adopting this solution with the aim of reducing the VAT gap,” said Obel.
VAT collections for the financial year ended June 2022 amounted to Sh523.10 billion, an equivalent of 27.72 per cent of the Sh1.92 trillion ordinary revenue.
