The Kenya Revenue Authority (KRA) is the central government agency mandated to collect national taxes.
The authority is also mandated to implement all national taxes in Kenya. For that, KRA is paid a commission. In recent times, the National Treasury has proposed expanding KRA’s mandate to collect revenue for some of the 47 counties.
KRA’s Systems
Over the years, KRA as a corporate body has developed systems that can easily be integrated with the activities of various organizations. KRA has technical and personnel skills and resources that are available to other organizations for hire.
For example, the pay-as-you-earn (PAYE) system can be easily integrated with the National Social Security Fund (NSSF) and the National Health Insurance Fund (NHIF) systems.
This is because PAYE, NSSF, and NHIF use the same employment data for compliance purposes for employed persons. However, NSSF and NHIF also have unemployed members whose data is not available in KRA.
KRA’s Agency Services to other Organizations
Nevertheless, over the years, KRA has attempted to forge alliances with NSSF and NHIF without much success. The alliances have not succeeded for one reason or another. It is noteworthy that these alliances have been purely business initiatives.
KRA was expected to collect the members’ contributions and, in return, be paid a commission. This was a private initiative between KRA and the other organizations.
However, KRA has been contracted by other organizations in Kenya to collect their levies on an agency basis. Some of the organizations that have contracted KRA are government organizations such as the Kenya Bureau of Standards (KEBS) and the Kenya Sugar Board (KSB). These two organizations rely on data that is provided to KRA by business organizations for tax purposes.
Proposed Expanded Mandate
In recent times, the National Treasury, in a draft proposal to enhance revenue collection at the county level, has proposed that KRA extend its services to some of the 47 county governments. The proposed counties are Kiambu, Machakos, Mombasa, Nairobi, Nakuru, Narok and Nyeri.
A close examination of these counties will reveal several factors that would inform the selection of the counties. These counties are among the most developed economically; they have high revenues; they are relatively urbanized; and they have a relatively higher level of formalized structures.
Devolved governance through counties has existed in Kenya for about four years. Most counties do not have the revenue administration capacity. They have weak, dysfunctional structures inherited from the defunct city councils.
The numerous teething problems of the county governments and heavy reliance on funding from the central government have resulted in laxity in revenue collection from local sources.
Counties have numerous revenue sources that, if managed well, provide adequate revenue to cover their budgets. Some of the most common revenue sources are property rates, entertainment taxes, parking fees, national park fees, market fees, business registration fees, etc.
Extending KRA’s mandate to the county government may have been informed by the fact that the tax authority has the capacity and experience to collect the revenues for the counties.
This is in consideration of the many KRA-registered taxpayers based in those counties. In essence, KRA already has the data the counties need to boost their revenue collection.
What is the Effect on County Governments?
One effect is that revenue collection will be streamlined, and the hold that cartels have on county government revenues may diminish. Hence, the revenue departments may be scrapped, and this may result in the sacking of some people.
There may be increased revenue collections, which may result in decreased revenue disbursements from the central government. The county will also have to pay KRA a commission for collecting the revenues.
What is the Effect on Taxpayers?
One significant effect on taxpayers is that more of their information will be available to KRA. This may lead to demands for more tax payments. Another effect is that more people may be brought into the national tax net.
However, with streamlined revenue collection, taxpayers in the counties will be able to hold their counties accountable for how revenue is used. This will happen only if the people at the county level are proactive.
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Disclaimer
This post is for a general overview and guidance and does not in any way amount to professional advice. Hence, www.taxkenya.com, its owner, or associates do not take any responsibility for the results of any action taken on the basis of the information in this post or for any errors or omissions. Kenyan taxpayers must always rely on the most current information from KRA. The tax industry in Kenya is very dynamic.
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