KENYA REVENUE AUTHORITY

CIAT TECHNICAL CONFERENCE

Presented by

Pancrasius Nyaga

COMMISSIONER OF DOMESTIC TAXES

LARGE TAXPAYERS OFFICE

AMSTERDAM, NETHERLANDS OCTOBER 2012

TITLE: ‘SMART COOPERATION’

COOPERATION AS A TOOL IN COMPLIANCE RISK MANAGEMENT STRATEGIES

1.0 INTRODUCTION

Kenya Revenue Authority (KRA) is a Semi-autonomous State Corporation under the Ministry of Finance established in 1995 by The State Corporations Act Cap 469 of the Laws of Kenya.

KRA is charged with the responsibility of collection, accounting for and administration of Government Revenue(s).

The governance structure comprise of:

Board of Directors

Commissioner General

Six (6) Commissioners as departmental heads

PREAMBLE TO COOPERATION

Challenges

Non filers

Late payments

False declarations and fraudulent tax refund claims

International tax issues-Transfer Pricing

Unreliable tax agents

Limited automation (Manual processes)

Opportunities

Political & Legal environment

Stakeholders (Competitors, Regulators, Whistle blowers, etc)

Automation-appreciation (ITMS)

Voluntary disclosure-Self assessment

Staff motivation- professionalism, integrity, etc

2.0 ENHANCING EFFECTIVE COOPERATION

2.1 International Scene

Membership to International Tax Bodies e.g. CIAT, CATA, OECD, ATAF, etc

Tax Information Exchange Agreements (TIEAs)

Double Taxation Agreements (DTAs), including MAPs and APAs

Transfer Pricing Legislation-based on arms length principle

Regional Authorities Technical Forum (EARATC) affiliation

2. 2 Domestic Scene At the Domestic level, KRA cooperates with various

stakeholders as follows:

(i) Public Institutions

Registrar of Companies

Registrar of persons

Ministry of Foreign affairs

Ministry of Finance & Public Procurement Oversight Authority

Department of Mining and Geology

Anti-Corruption Agency (EACC)

2.2 Domestic Scene Cont……

(ii)Tax Intermediaries e.g. Auditors/Tax Agents-Enhance compliance and information exchange with TPs (clients)

(iii) Regulatory bodies (CBK, ICPAK, CMA, IRA,ERC, etc)

(iv) Utility Companies (KPLC, NWSC, etc)

(v) General public (whistle blowers vs reward schemes)

Benefits of Cooperation

(i) Reduced cost of compliance

(ii) Improved service delivery to Taxpayers

(iii) Enhanced voluntary Compliance

(iv) Reduction in tax evasion and frauds

(v) Enhanced revenue performance (Kenya-US$ 1.99 B 2002/03 to US$ 8.54 B 2011/12)

(vi) Improved image of KRA

IMPACT OF INCREASED REVENUE COLLECTION

IMPROVEMENT IN INFRASTRUCTURE

IMPACT OF INCREASED REVENUE COLLECTION

IMPROVEMENT IN INFRASTRUCTURE

3.0 SMART COOPERATION

Modern Approach

Various reform initiatives that have improved compliance risk management processes include:

• Online processing of Tax Compliance Certificates

• Automation of business processes-collaboration of information

• Excise stamps management-Spirits & Tobacco industries

• Online data validation & reconciliation of revenue

KRA ONLINE SYSTEMS

NO SYSTEM SUPPORT

1 Integrated Tax management Systems

(ITMS)

• Registration

• Filing

• Revenue reconciliation

2 Common Cash Receipting System

(CCRS)

• Online processing of payment receipts

3 Electronic Cargo Tracking • Online monitoring of transit cargo

4 Flow Meters • Aligning declarations to flow meter

readings-Spirits industry

5 GPRS enabled Electronic Tax

Registers

• Online monitoring of sale transactions

6 SIMBA • Linking document lodgment, processing

clearing and payments

7 Vehicle Management System (VMS) • It enhances registration and transfer of

motor vehicles

4.0 KEY ELEMENTS FOR SMART CO-OPERATION

Key enablers of cooperation between revenue administrations and other stakeholders include;

• Automation

• Legislation

• Political goodwill

• Professional staff with high integrity

5.0.CONCLUSION

Many challenges face revenue authorities hindering achievement of their full potential in revenue collection.

However, revenue administrations should put more focus on the various opportunities available to them.

Focus on effective engagement through Smart cooperation is key to the success in enhancing compliance risk management. This ultimately leads to enhanced revenue collection among other benefits.