KRA now wants Sh61 billion to hunt for Sh3 trillion taxes
Times Tower, the Kenya Revenue Authority's head office in Nairobi. Taxman accuses Treasury of stifling its plan to get more staff and gadgets to help increase revenue collection.
What you need to know:
- Taxman wants Sh37.01 billion for staff remuneration, recruitment of new staff and capacity building, Sh7.9billion for revenue mobilisation and operations and Sh9 billion for the existing contracted services for revenue collection and operations.
Kenya Revenue Authority (KRA) has warned that it will not be easy to collect Sh3.03 trillion in tax revenue to finance the Sh3.6 trillion budget for the 2023/24 financial year currently under consideration in the National Assembly, without adequate funding.
Financing the budget also includes repayment of the public debt, which stood at Sh9.4 trillion as of April, against a debt ceiling of Sh10 trillion enacted in May 2022.
In its budget proposal submitted to the National Treasury on January 31, 2023, KRA had sought Sh57.4 billion in direct funding from the national government to finance its operations for the next financial year.
Though, the amount is exclusive of Sh3.8 billion in Appropriation In Aid, that it is expected to raise on its own by way of charges levied on customers for services rendered, among others and Sh625.4 million donor funding.
Cumulatively, KRA is seeking Sh61.8 billion to operate comfortably, which includes financing donor funded projects for the next financial that starts on July 1, 2023.
However, in a perfect case of hoping against hope, the National Treasury approved Sh23.7 billion as the taxman’s budget for the 2023/24 financial year in the estimates submitted to the National Assembly.
This includes Sh23.6 billion in recurrent budget and Sh122.4 million as development financing, which is 0.83 percent, way below the minimum two percent funding of the revenue target it requires and is less than the Sh26.3 billion allocated in the current financial year.
KRA had proposed to Treasury to include the two percent minimum funding in the Finance Bill 2023, but was ignored.
The taxman’s budget, as proposed by Treasury, is still under consideration by the House.
Although there is a likelihood of an increase based on the recommendations of the MPs, the taxman is warning that anything below what it proposed to Treasury will have a significant effect on the country’s revenue collection and therefore, budget financing.
“Inadequate funding of KRA puts at risk the achievement of the set revenue target,” a document the taxman submitted to parliament reads adding; “of critical importance is the requirement to lease additional 24 scanners for critical entry and exit points” at Sh2.13 billion.
KRA also requires Sh5 million to develop a Case Management System (CMS) for the automation of background checks, vetting and lifestyle audits.
According to the KRA document in our possession, “this ceiling restricts the possibility of funding allocation based on actual needs which should be at least at two percent of the revenue target.”
“There is a need for intervention to unlock this challenge,” the document reads.
To boost revenue collection and ensure the target of Sh3 trillion is achieved or thereabouts, the taxman wants Sh37.01 billion for staff remuneration, recruitment of new staff and capacity building, Sh7.9billion for revenue mobilisation and operations and Sh9 billion for the existing contracted services for revenue collection and operations.
The authority also requires Sh2.45 billion for leasing of at least 402,043 square feet office space and Sh3.14 billion for technology, innovation and digitisation “to enhance compliance and tax base expansion.”
The document indicates that the authority requires 4,650 additional staff as per its corporate plan “for effective revenue mobilisation and operations to deliver on the target.”
In the next financial year, KRA targets to recruit 3,000 staff at Sh4.8 billion, 1,350 Revenue Service Assistants (RSAs) at Sh1.2 billion and has also reinstated the Graduate Trainee (GT) programme “to ensure availability of relevant skilled workforce for revenue mobilisation.”
About 500 GT personnel are targeted in the next financial year at the cost of Sh1.1 billion.
The authority also requires an annual budget of Sh782 million to engage students and new graduates in attachment and internship programmes in compliance with the government directive.
To enhance revenue mobilisation, KRA acting Commissioner, Corporate Support Services Ms Nancy Ng’etich told members of the Finance and National Planning Committee of the National Assembly that Sh2.13 billion is needed for leasing of additional scanners for the country’s “critical entry and exit points”.
The exit and entry points include Isebania, Namanga, Loitoktok, Taveta, Lunga Lunga, Lwakhakha, Suam, Wajir, Moyale, Lokichoggio, Moi International Airport, Eldoret International Airport and Kisumu.
Key items that the taxman requires for revenue collection and operation include licenses and maintenance contracts, office space rental leases, security, utilities, medical expenses and insurance among others.
“Inadequate funding results in withdrawal of services, pending bills and contract default among others,” said Ms Ng’etich.
The authority also wants to move from the current Electronic Tax Register (ETR) to Electronic Tax Invoice Management System (e-TIMS), to be rolled out and expanded at Sh550 million.
The system, to be located in Nairobi, will enable real-time validation of invoices at the trader tills prior to issuance to the customer and transmission to the taxman.
“This will increase VAT compliance, minimise VAT fraud and increase tax revenue by ensuring the validity and transmission of tax invoices from traders' systems to KRA,” Ms Ng’etich said.
But with the funding deficit, it is unlikely that e-TIMS will be rolled out as projected.
Other key projects to be affected due to funding deficit include Sh750 million Next Generation Tax Platform implementation, Integrated Customs Management system (iCMS) rollout at Sh138.5 million and the setting up of a disaster recovery and business continuity site outside Nairobi at Sh335.6 million.
Others are customer relationship management system and digital channels expansion Sh136.5 million, rebranding to Kenya Revenue Service (KRS) Sh250 million, smart gates technology for efficient cargo clearance at the ports and One Stop Border Points (OSBPs) at Sh70 million and rehabilitation and renovation of stations Sh191.6 million.
KRA’s vehicle fleet deficit is 100 and needs 4,554 computers to achieve 1:1 staff-computer ratio.
The taxman also plans to open offices in counties without its presence. They include Nyandarua, Bomet, Baringo, Nandi, Makueni, Homabay, Kajiado and Marsabit with additional office spaces required in Nairobi, Mombasa, Kericho, Migori, Kitale, Isiolo, Thika and Meru.
“Revenue collection has a bearing on our debt obligations. It means that if we collect less, we will have to borrow more and therefore compound our debt stock,” said Molo MP Kuria Kimani, the Finance committee chair.
Kitui Rural MP David Mboni,member of the committee, said that Treasury should explain why it is stifling the allocation to KRA despite the heavy responsibility it has as his Baringo North colleague Joseph Makilap warned that it will be detrimental to reduce the authority’s budget and expect that it will hit the projected revenue target.
The 2023 Budget Policy Statement as approved by the House in March this year, had projected KRA to collect Sh2.5 trillion for 2023/24 financial year, but Ms Ng’etich stunned the MPs when she revealed that a trip to State House by the top KRA brass saw the target rise by Sh504 billion.
