What you need to know:
- The new system is expected to see KRA narrow the VAT tax gap by collecting the billions of shillings it has missed in the past.
- Last year, the tax agency announced a crackdown on businesses suspected to have issued fictitious invoices since 2013.
The Kenya Revenue Authority (KRA) targets to net about Sh400 billion from a purge on businesses dodging taxes through false invoice declarations.
The taxman says its new Tax Invoice Management System (eTIMS) would give it access to full trading information real-time, filling the gap many businesses have used to pay fewer taxes.
The KRA said it would particularly target rogue traders who have been issuing fictitious invoices or making sales without issuing invoices.
These are traders who facilitate consumers to avoid paying Value Added Tax (VAT) by failing to report sales they make and those who issue fictitious invoices and then claim VAT refunds.
“The tax gap is Sh400 billion. Part of this is coming from traders issuing fictitious invoices or selling without issuing an invoice. There is an opportunity now to collect that tax,” KRA’s deputy commissioner at the Medium Tax Office, Domestic Taxes Department, George Obel, told a briefing early this week.
The new system is expected to see KRA narrow the VAT tax gap by collecting the billions of shillings it has missed in the past, seeing VAT collection stagnate at about four percent of the Gross Domestic Product (GDP).
The authority also says the system will see it only make authentic VAT refunds to traders, by eliminating fictitious invoices.
Last year, the tax agency announced a crackdown on businesses suspected to have issued fictitious invoices since 2013, leading to losses running into billions of shillings at a time the taxman is faced with high targets.
This works when a trader buys goods and pays VAT but is entitled to claim a refund on proving a sale, meaning the consumer ends up being the VAT payer.
The KRA said in September the intention was to evade taxes.
Mr Obel said with an initial implementation of the new system, the KRA has started realising a growth in VAT revenues, with February collections surpassing targets.