KRA to pay whistleblowers Sh500,000 for revealing tax cheats

KRA headquarters, Times Tower. FILE PHOTO | NMG 

By CONSTANT MUNDA
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Summary

• The reward is contained in the Tax Laws Amendment Bill 2020 and lowers the threshold for awards leading to the nabbing of tax cheats.
• At present, the Act only prescribes a reward for the provision of information leading to the identification and actual recovery of unassessed duties or taxes.
• As part of the crackdown, KRA is expected to constantly monitor high-networth individuals whose lifestyles are not in tandem with the taxes paid.

The Kenya Revenue Authority (KRA) will pay Sh500, 000 to whistleblowers who will reveal businesses and individuals that breach of tax law, offering an additional incentive in the war against tax cheats.

The reward is contained in the Tax Laws Amendment Bill 2020 and lowers the threshold for awards leading to the nabbing of tax cheats.

At present, the Act only prescribes a reward for the provision of information leading to the identification and actual recovery of unassessed duties or taxes.

“This provision will only apply where KRA has not awarded the informer for identification of unassessed duties taxes or recovery of unassessed duties or taxes,” tax experts at consultancy and audit firm KPMG wrote in their assessment of the Tax Laws (Amendment) Bill currently before the National Assembly.

“The proposed amendment will provide an additional incentive for persons to provide information to KRA on tax defaulters.” The KRA is currently required to pay informants five percent of the recovered unassessed taxes or a maximum of Sh2 million following a tip.

Whistleblowers who help KRA identify unassessed taxes or duties take home one percentage of the value or a maximum of Sh100, 000. Faced with the huge task of improving revenue collection, KRA has set its sights on suspected tax cheats and tax avoiders following an order from President Uhuru Kenyatta in November 2018.

As part of the crackdown, KRA is expected to constantly monitor high-networth individuals whose lifestyles are not in tandem with the taxes paid.

The enforcement unit at KRA has sought to do this through various strategies including using databases such as bank statements, import records, motor vehicle registration details, electricity and power bills as well as data from the Kenya Civil Aviation Authority (KCCA) to track potential tax cheats and evaders.

The KRA, for example, disclosed last August that only 33,426, or 8.3 percent, of the 401,306 companies, co-operatives and trusts in their database had paid taxes on their net earnings in the financial year ended June 2019, pointing to high levels of non-compliance.

This is despite 168,428 or 42 percent of the firms registered for corporation taxes having filed returns, signalling they were active.

The proposed income and corporate tax cuts aimed at protecting the economy against the effects of the coronavirus pandemic will cost the Kenya Revenue Authority (KRA) Sh1.3 billion daily over the next three month, Parliament’s budget office has warned.

The Parliamentary Budget Office (PBO) — the unit which advises lawmakers on financial, budgetary and economic matters — said revenue collection will drop by Sh122.2 billion between April and June if lawmakers adopt the tax cuts.

KRA has made rare drop in tax collections in the first two months of the year of Sh3 billion, reflecting the subdued business activity amid fears the coronavirus will hit the economy hard.