Being tax-compliant crucial to building a successful venture

Last month the Kenya Revenue Authority (KRA) won a Sh9.3 billion tax case against Paleah Stores Limited in a judgment delivered by the Tax Appeals Tribunal.

By MURORI KIUNGA
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Summary

• Last month the Kenya Revenue Authority (KRA) won a Sh9.3 billion tax case against Paleah Stores Limited in a judgment delivered by the Tax Appeals Tribunal.
• The amount constitutes corporation tax and value added tax (VAT) inclusive of interest and penalties for the years of income 2008 to 2014.
• This and other news of KRA renewed energy to track down tax cheats are rattling the minds of many traders across the country.

The amount constitutes corporation tax and value added tax (VAT) inclusive of interest and penalties for the years of income 2008 to 2014.

This and other news of KRA renewed energy to track down tax cheats are rattling the minds of many traders across the country.

If you have been following the media, you are aware that Kenya Revenue Authority is using multi-pronged strategies to net tax cheats. Technology and business intercourses are really working for them leaving tax cheats with nowhere to hide under the sun.

In the current dispensation your customers, your suppliers, your bankers and even online transactions are providers of data that can betray your failure to honour your patriotic obligations.

So, what is the way out?

The solution lies in not thinking of how you can outwit KRA or waste energy complaining about difficulty tax regime, of which you have no control. The best solution is compliance to save your business now and in future.

Most traders actually do not know that the cost of compliance is much lower than the cost of non-compliance and living in fear and risk of potential penalties once caught.

But as it is said, ignorance is not a defense. In the case above it is notable that Paleah Stores Limited admitted in its statement of facts before the Tribunal that it was a victim of bad professional advice leading to its accounts and tax returns not reflecting the correct position of its operations for the stated years.

Thus, it is important as a business person to ensure you are doing the right thing all the time.

In Kenya payment of taxes are based on self-assessment. This means it is the responsibility of the trader to compute tax payable using the tax rules and guidelines issued by KRA. To do this you must keep proper records and understand taxation laws and guidelines.

Some taxes such as VAT are paid by the consumer and not the trader. The trader is a mere agent who must collect and remit to the taxman.

Two things are extremely important in tax compliance. First you must keep your records very well. Second you must hire or consult a knowledgeable accountant who is conversant with taxation to audit you and guide you.

KRA has a whole department of public education and you will be surprised with the help you get if you called or walked in and said you want to understand any issue related to taxation.

Consulting an expert may look expensive especially if your business is small but the cost of not doing things right is higher. You could actually be forfeiting many benefits by not being informed.

Keeping good records of all transactions, separating business bank account from your personal account will help argue your case in case of any tax dispute.

Mr Kiunga is a business trainer and the author of The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market.

murorikiunga@yahoo.com.