KRA COMMISSIONER-GENERAL JOHN NJIRAINI. FILE PHOTO | NMG 
Summary
- KRA said it will deregister all taxpayers who have not migrated their profiles to the online platform beginning September 1 as part of a wider plan to smoke out tax cheats.
- Taxpayers who are yet to do so have a month to do so or be taken out of the system with serious consequences to their businesses.
- iTax-compliant taxpayers who have not filed returns in the past three months, or are submitting nil returns despite evidence of having steady incomes have also been put on notice.
Millions of Kenyans may be blocked from
accessing critical public services beginning next month as the taxman
moves to punish tax cheats with the termination of personal
identification numbers (PINs).
The Kenya Revenue
Authority (KRA) said in a public notice that it will deregister all
taxpayers who have not migrated their profiles to the online platform
beginning September 1 as part of a wider plan to smoke out tax cheats.
“KRA
has noted that there are taxpayers, who have not migrated their PINs
into iTax while others taxpayers, who are already on iTax, are either
not filing or are filing nil or no returns,” the notice said.
Taxpayers
who are yet to migrate their PIN information to the iTax — KRA’s online
tax payment portal — have a month to do so or be taken out of the
system with serious consequences to their businesses.
iTax-compliant
taxpayers who have not filed returns in the past three months, or are
submitting nil returns despite evidence of having steady incomes have
also been put on notice.
Taxpayers cut off
This
impending and unprecedented deregistration of PINs will see millions of
Kenyans cut off from making critical transactions that require proof of
active registration as a taxpayer.
The list of
transactions that require proof of an active PIN certificate includes
registration of land titles, approval of development plans,
registration, transfer and licensing of motor vehicles, and registration
of business names and companies.
Others are
underwriting of insurance policies, customs clearing and forwarding,
payment of deposits for power connections, supplying goods and services
to the State, as well as opening accounts with financial institutions.
This unprecedented move is set to hit businesses and individuals hard.
For
instance, if a deactivated taxpayer supplies goods to Company X and
charges value added tax (VAT), the recipient of the service will not be
able to claim a refund when filing returns since the iTax system will
not recognise the supplier.
A similar scenario will
play out when Company Y attempts to wire a consultant’s withholding tax
to the KRA for services rendered.
If the consultant has been struck off the KRA’s
roll, Company Y could opt to hold onto their dues until they are
reactivated as opposed to settling the invoice for a “non-existent”
taxpayer.
Compliance hurdles also await employers since
monthly Pay As You Earn (PAYE) deductions can only be credited to
active KRA accounts held on the iTax platform.
“We
advise that all taxpayers and the public use the “PIN Checker” link
available on.... the iTax portal to verify details of their suppliers and
confirm if their PINs are active,” the KRA said.
The iTax system was launched in October 2013 to increase efficiency and boost compliance.
The
platform enables taxpayers to file returns from any location with
Internet connection without having to physically move to the taxman’s
premises.
Filing mandatory
The
KRA, with effect from August 1, 2015, made it mandatory for taxpayers
to file returns through the portal as it switched from the cumbersome
manual system.
Failure to file returns on time attracts
a Sh10,000 fine or 25 per cent of salaried workers’ tax bill, and
Sh5,000 in case of SMEs that are subject to turnover tax.
Other business incomes are liable to a fine of Sh20,000 or five per cent of tax liability.
Despite
the mandatory shift to iTax and hefty fines for noncompliance, millions
of Kenyans are still holding old PIN certificates and as a result have
not been filing their returns.
Another set of taxpayers updated their profiles on
the KRA portal but, for nefarious (tax evasion) or purely lethargic
reasons, fail to file their returns when they fall due.
In
the six months to June 30, 2017, 50 per cent of the 4.8 million
registered taxpayers failed to file their 2016 returns. This number is
higher than the 2.3 million Kenyans who breached the tax return filing
deadline within the same period in the 2015 financial year.
The
KRA, which is under pressure of increasing tax collection targets, has
now upped the ante, seeking to cripple taxpayers’ transactions in a bid
to force them to embrace compliance.
The taxman had not responded to queries on how it plans to implement the new directive by the time of going to press.
It remains unclear whether deactivated taxpayers will part with a fine for their accounts to be restored.
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