The Star (Nairobi)

15 January 2013

Kenya: KRA Reintroduces Filing of Annual Tax Returns

THE Kenya Revenue Authority has reintroduced the filing and submission of tax returns by all salaried employees two years after former finance minister Uhuru Kenyatta exempted employees form the tedious paperwork and left the task to employers.

The announcement by KRA commissioner general John Njiraini comes as a disappointment to most salaried Kenyans who had been spared the annual ritual. The exemption, made by Uhuru in his budget speech, allowed employees who have no extra source of income to avoid filing the returns.

But KRA insists the individuals' filing is the only way that it can ascertain whether employers actually remit the deductions they make on employee's salaries. "It is a good practice," said Njiraini adding that it helps to create a tax culture while also allowing ordinary Kenyans to interact with KRA.

"For this purpose, I wish to disclose that amendments made through Finance Bill 2012, require all eligible persons to file income tax returns with effect from calendar year 2012."

The commissioner spoke after presenting the revenue collection results for the first half of the year 2012/2013. For the period between July and December 2012, KRA raised Sh380.6 billion, a 12.6 per cent growth.\

KRA however expressed concern that it has lost Sh11 billion of possible revenue because the VAT Bill was not passed. The authority expects to collect Sh881.2 billion this financial year, up from Sh707.4 billion realised in the 2011/2012 financial year, representing a 24.6 per cent increase in projection.

The tax authority is however behind target blaming it on economic conditions that fell short of expectations in the first half of the year. For instance, GDP was expected to grow by 5.5 per cent but grew at 4.7 per cent while inflation averaged 5 per cent out of a target of 9.8 per cent. The shilling was exchanging at 84.9 against a target of 86.4.

"It is estimated that these deviations have cost the exchequer Sh16 billion by the end of December 2012," KRA said. To increase collections, KRA is lobbying to start taxing the popular and low-cost "Keg" alcoholic drink which is currently exempted from excise tax.

KRA argues that the exemption, which was meant to discourage consumption of illicit drinks, has continued to undermine the uptake of other taxable beers leading into a slower than expected growth in domestic exercise duty. "It is questionable whether this objective has been met," Njiraini said.

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