The economic stability of any given sovereign state is perched on an effective tax remittance framework, devoid of any revenue leakages. Tax revenues are the engine that propels the country’s economic prosperity. Therefore, no taxpayer should be permitted to escape the payment of his just share of the burden of contributing to the national kitty to facilitate the Government in achieving its national objective of providing public goods such as roads infrastructures, and, public services such as education, security, health, sanitation, amongst others.
The desire of Kenya Revenue Authority (KRA) is to have all taxpayers (those with taxable income) to register in our tax system; timely file or lodge requisite taxation information; report complete and accurate information; and pay tax obligations on time. Where there is willful violation of tax laws, and there is evidence that confirms the same, the KRA implements enforcement action that includes prosecution.
Despite falling under the category of developing countries, Kenya has exhibited substantial economic potential based on the vibrancy of the economic activities taking place. The recently released Economic Survey 2019 shows that Kenyan GDP grew by 6.3% in 2018 with growths recorded in all key sectors of the economy such as Agriculture, Manufacturing, Construction, Energy, Finance, wholesale & Retail, ICT and Transportation & Storage.
However, despite the current and the projected economic potential, the same has not been reflecting in revenue collection, hence revenue shortfalls. Tax evasion has been a key contributing factor to this shortfall. Research by fiscal and economic think tanks indicate that tax evasion gobbles down billions of dollars in revenues every year, which consequently leaves governments struggling to bridge the resulting revenue deficit through borrowing, which comes with conditions from donors. External borrowing undermines our sovereignty as a nation.
A 2015 report by the Tax Justice Network-Africa titled ‘High-Level Panel on Illicit Financial Flows from Africa’ indicated that Kenya was losing more than Kshs 600 billion to tax evasion every year. This, without an ounce of doubt, is a colossal amount of revenue that could significantly impact the wellbeing of this nation if it found its right way to the government coffers. Unfortunately, the contemporary figure of the revenue lost to the menace could be higher, hence, the spirited fight by KRA against tax evasion.
Despite the jitters and the ‘discomfort’ which the onslaught on combating tax evasion has elicited in the recent past, the government’s and KRA’s resolve is to uproot this menace with all its roots for the wellbeing of this nation. Contrary to the narrative columnists and other opinion leaders have been advancing with an apparent intention to water down the fight against tax evasion, the only objective here is to rid the country of the vice.
There is absolutely no motive to cripple businesses as the narrative has it. KRA is not in the business of sabotaging any legitimate economic activities taking place in this country. Conversely, apart from revenue collection which the tax agency is popular for, KRA’s mandate extends to facilitation of economic activities. Ridding the economy of tax evaders is, therefore, a key aspect in facilitating these activities.
Another noble reason why we must win the fight against tax evasion is to promote fairness, a key taxation principle. It is unfair to have a handful of taxpayers supporting the economic development of this country singlehandedly as scores evade paying their rightful share of taxes. This does not live up to the principle of fairness.
Unfortunately globally, the ratio of the total productive population in a given country to the number of the actual taxpayers is very wide. The ratio is even wider in developing countries. With vices such as tax evasion on the rise, the responsibility to generate revenues to run the country is left in the hands of a significantly small number of taxpayers from whose contribution the government is expected to lay various infrastructural projects, pay teachers, doctors, police officers, among other key deliverables of a government to its people.
From the aforementioned highlights, it is clear that the war against tax evasion is the only choice at hand if this country is scale to greater heights. KRA has over time put in place strategic measures to battle tax evasion and so far, the measures have heralded a light at the end of the tunnel. In the past 2018/2019 financial year, for instance, KRA collected Sh 8.53 billion after taking 222 individual to court over tax evasion. Were it not for the measures in place, the revenue would have gone down the insatiable tax evasion pit. Hence our role is to convert the tax eaters to compliant taxpayers by all means in order to build confidence in our tax system.
To get a firmer grip and a stronger foothold on curbing tax evasion, KRA has established strategic partnerships with key government organs such as the Directorate of Criminal Investigations (DCI) and the Office of the Director of Public Prosecutions (DPP). The DCI has already seconded about 52 of its officers to KRA while the DPP has gazetted 11 prosecutors from KRA. The two measures have substantially boosted KRA’s capacity to deal with tax evaders accordingly. At the close of the current financial year, we are optimistic to emancipate more revenue from the venomous pangs of tax evasion webs.
Apart from tax evasion, revenue shortfalls are also occasioned by other factors such as tax avoidance, losses made by corporate bodies and tax disputes, among others. Contrary to a narrative advanced by an article published in the Business Daily on 11th September 2019 titled Tax dispute not necessarily evasion, KRA has in place sufficient capacity and the right professional approach to each of these aspects. Tax evasion, for instance, is a criminal offence, and on that basis, can only be handled as such. On the other hand, if a taxpayer has a dispute over tax payment, we have an effective Alternative Dispute Resolution framework that befits tackling such a case.
KRA’s endeavours in the fight against tax evasion should therefore not be misconstrued to mean bringing down every party that has a tax dispute. KRA is upbeat that very soon, the menace will be annihilated. The onus is therefore on all patriotic citizens of this country to join the governments’ hand to bring down the vice for the sake of current and future generations.
The writer is the Commissioner of Investigations & Enforcement, Kenya Revenue Authority (KRA)