MPs now want National Treasury Cabinet Secretary Ukur Yatani to form a national taskforce to review the national tax systems at the Kenya Revenue Authority (KRA) to check against revenue loss through leakages.
This comes as the National Assembly Finance and National Planning Committee launches investigations into the cause of declining national revenue performance by KRA following a request from nominated MP Godfrey Osotsi.
Mr Osotsi, in his request for a statement in the House last week, wants Mr Yatani to provide a report on the status of investigations of senior KRA officials alleged to be engaging in tax fraud.
The committee, chaired by Homa Bay Woman MP Gladys Wanga, is also required to confirm whether the KRA management ordered a thorough and professional lifestyle audit on its senior staff, including commissioners.
National tax policy
In a report before the National Assembly, the Public Accounts Committee (PAC) has recommended that the taskforce submits a report to Parliament within three months and should oversee the development of a national tax policy based on equity and fairness, flexibility, economic growth and efficiency.
“[That] the CS ensures that effective and efficient revenue collection administration and systems that boost revenue collection, recognise, and support taxpayers as partners in national development are in place,” the watchdog committee chaired by Ugunja MP Opiyo Wandayi says in its report.
The PAC report on the audited accounts of the national government for the 2017/18 financial year will be debated by the MPs who will either approve or reject it.
Mr Osotsi says that the declining national revenue performance that has led to exchequer and budgetary challenges at the national and county governments is a concern to the country.
“Could the CS confirm whether any organisational and managerial challenges being experienced at KRA have contributed to the revenue decline,” Mr Osotsi says in his request for a statement.
The nominated MP also wants the CS to furnish the Ms Wanga-led committee with a detailed list of all top management positions at the country's revenue agency.
List of KRA officials
To get to the bottom of the matter, Mr Osotsi says the list should indicate the positions, names of current holders, county of origin, ethnicity, academic and professional qualifications of holders and number of years of service.
Ms Wanga’s committee is further required to report to the House details of how much revenue the country lost following the recent migration of ICT Platform from Legacy Environment to iTax.
How the loss was mitigated is a matter to be established by the committee as well.
But even as the investigations get under way, the PAC report paints a gloomy picture of the country’s revenue collection.
During the 2017/18 financial year, the country experienced a revenue shortfall of Sh124.58 billion, which is 8.3 per cent of Sh1.54 trillion the National Treasury had projected KRA to collect during the year under review.
The watchdog committee’s report further observed that the arrears of revenues have continued to grow from Sh194 billion in the 2016/17 financial year to Sh305.9 billion in the 2017/18 year.
“The significant arrears of revenue due and uncollected undermine the principle of equitable sharing of national revenue between the national government and counties,” the report says.
Article 203 of the Constitution provides that not less than 15 per cent of all revenue collected by the national government as audited and approved by the National Assembly shall be allocated to the county governments.
This means that the persistent increase in arrears of revenue denies the national and the 47 county governments the “scarce financial resources that they need to undertake their development projects”.
“The CS for the National Treasury, KRA and other receivers and collectors of revenues must relook their strategy for collecting the growing arrears of revenue,” the PAC report notes.
The committee is also required to investigate claims that the abuse of the alternative dispute resolution (ADR) programme has contributed to a decline in revenue collection.
This comes hot on the heels of claims that the programme has been used to let organisations who owe large amounts in taxes off the hook in exchange for kickbacks at a time when the country is struggling to finance its operations.
“The CS should explain why the tax appeal and disputes mechanism has occasioned questionable and irregular tax reduction and avoidance in favour of some potentially large taxpayers leading to massive national revenue decline,” the nominated MP says.
Mr Osotsi further notes that where KRA has not embraced ADR, it has had revenue-related disputes dragged to court unnecessarily.