Hit or miss? KRA’s tax moves in a time of Covid

With the Covid-19 relief measures translating into a Sh172 billion foregone revenue in a full financial year and the adverse business environment undermining revenue collection, the Kenya Revenue Authority (KRA) is banking largely on administrative revenue enhancement to meet the target for the current financial year.

“The KRA has enough footprint of the transactions in this country to bring in additional revenue even in these times. There are people, for example, who are in county records but missing in KRA records. We have those who have registered with professional bodies but not with KRA. These are some of the people we are bringing on board,” says Caxton Masudi, the Deputy Commissioner for Policy and Tax Advisory at KRA.

In the current financial year, the agency is going as far as roping in loss-making firms into the tax net hoping to mobilise an additional Sh1 billion from the minimum tax based on one per cent of a business’ gross income effective January 1, 2021.

Mr Masudi rejects the view that the timing of the tax is inauspicious and says the expected rebound in the business environment would phase out the tax for a number of businesses.

“The minimum tax is payable only if the amount of installment tax is lower than the amount computed and payable under minimum tax. This means that when the economy improves and generates better returns for businesses, it will probably render much of the minimum tax redundant because if you are paying more than the minimum tax, it does not have to apply to you,” Mr Masudi says.