Experts Advocate for Registration of Taxpayers at Birth

To help the Kenya Revenue Authority (KRA) maximize its collecting potential, tax specialists have advocated a single lifetime identifier for all eligible taxpayers.

The tax experts from the Institute of Certified Public Accountants of Kenya (ICPAK), the Institute of Economic Affairs (IEA), and the consultancy firm Deloitte East Africa told Parliament that the Kenya Revenue Authority (KRA) is currently unable to track and register potential taxpayers due to a lack of an integrated system.

“The absence of a system to identify taxpayers has resulted in the exclusion of a large proportion of potential taxpayers from the tax net. The Kenya Revenue Authority is therefore unable to track and register these persons,” ICPAK chairman, Philip Kaikai said when he appeared before the Finance Committee of the National Assembly with comments on the proposed National Tax Policy(NTP).

To prevent dormant PINs, the experts recommended  the implementation of a personal identification number (PIN) category for employees, students, and businesses. According to them, this will allow sole proprietorships and partnerships to have PINs separate from individual or personal PINs. The NTP proposes a full review of tax laws every five years to alleviate the volatility of tax rates.

The strategy also urges the creation of a framework for identifying tax benefits and addressing issues with international taxation and treaties.

The Treasury document aims to address issues with the expanding tax expenditure, which is projected to account for 2.61 percent of GDP in 2021, complexity of taxation of emerging economies, including internet business, low tax compliance, and delays in the resolution of tax disputes.

“The proposal on tax administration is not exhaustive of issues affecting tax administration. There is limited access to taxpayer transactional information,” Mr Kaikai said. “Kenya currently operates a self-assessment. This implies that KRA relies on the taxpayer’s honesty and accuracy in declaring income.”

“To broaden the tax base and enhance compliance in Kenya’s tax system, the policy should require every legal person to be issued with a PIN to keep proper books of accounts for tax determination and those with an annual turnover of Sh5 million to be subject to audit and representation by a tax agent,” ICPAK said.