Kenya Revenue Authority bets on technology to plug excise duty loopholes

The Kenya Revenue Authority is banking on new technology to seal loopholes in excise duty collection amid an increased revenue collection target.

At the same time, the taxman announced that it had marginally surpassed revenue target for 2013/2014 financial year. It realised Sh963.8 billion against a revised target of Sh963.7 billion.

The Treasury revised the earlier tax target of Sh973.5 billion by Sh10 billion, citing poor economic growth prospects and depressed import trends.

BIGGER TASK

Faced with an even bigger task of raising Sh1.12 trillion to fund 2014/15 budgetary expenditure, the taxman hopes to effectively use the Electronic Goods Management System to eliminate excise tax fraud executed through under-declaration or non-declaration of excisable goods by companies.

The authority has been implementing the electronic system in phases since December last year. All of them are now in place.

KRA Commissioner General John Njiraini said on Tuesday that the EGMS was also aimed at ridding the market of sub-standard goods.

DETECT FAKE STAMPS

“Track and trace technology helps detect fake stamps during field enforcement,” Mr Njiraini told the press on Tuesday and attributed a 38 per cent increase in excise revenue in the last financial year to the system.

It monitors manufacturing of excisable products from their production stages in real time giving quantity and date of production to their distribution.

Currently, products that are fully under the EGMS regime are tobacco, wines and spirits with a total of 25 automated products line under the taxman’s microscope.

(READ: KRA goes mobile to provide tax data)

Mr Njiraini, however, said only firms with automated production lines conform to the system, noting that they were considering pegging new licensing to automation to expedite the rollout of the system.

“We are considering basing new licences on adoption of automated production lines that will facilitate adoption of EGMS so that all players are under our watch,” he said.

Retailers will be given special gadgets that can authenticate excisable goods supplied as the gadgets can read the special codes recognised by KRA.

This is to supplement about 50 officers that have been deployed with GPS enabled gadgets to conduct random searches in retail outlets countrywide.

Growth in both customs and domestic taxes coupled with increased contribution from VAT saw the authority end the year successfully.

Total domestic tax collections fell short of the mark to Sh628.3 billion against a target of Sh633.2 billion despite contributing 65.2 per cent of the annual revenue performance.

Custom taxes on the other hand surpassed the target by about Sh5 billion settling at Sh331.8 billion against Sh326.2 billion.

Mr Njiraini said reforms undertaken in VAT last year had had a positive impact on the authority as its overall contribution to revenue grew to 25 per cent from 23 per cent the previous year.

(READ: No relief yet for firms seeking VAT refunds)

SIMPLIFIED ADMINISTRATION

“VAT was a problem to the authority for a long time but the reforms have simplified its administration, hence the growth in contribution,” he said.

During a similar period in 2012/2013, tax collection grew by 13.2 per cent, beating the Treasury target by collecting Sh800 billion.

The taxman is under pressure this year to improve tax collection to achieve a Sh1.12 trillion target so as to fund the country’s huge budget.