It has been a couple of months ever since the Ruto Government took over Kenya’s administration. There have been many promises, many of which are long-term and will be realized, hopefully, in the future. Ruto’s Government has also promised a lot in terms of pushing the digital agenda, and this was amplified during the staging of December 2022’s Jamhuri Day, at which time the President explained the goal of the Digital Superhighway.
To push these ambitions further, Ruto’s government has revealed the Draft Budget Policy Statement, which highlights his economic plans for the country, and where the funds will be sourced from, at least for some instances.
According to the document, and as part of the economic turnaround plan, the government will increase revenue collection efforts by the Kenya Revenue Authority (KRA) to KES 3.0 trillion in the FY 2023/24 and KES 4.0 trillion over the medium term.
Arguably, this is seen as a key step in achieving the government’s broader economic development objectives.
Now, and to this end, the draft states that it will perform a number of both tax administration and tax policy reforms.
That’s not all: tax chief the KRA will reportedly implement several measures to increase revenue collection.
For instance, there will be a reduction of the Value Added Tax (VAT) gap from 38.9 percent to 19.8 percent by fully rolling out the electronic Tax Invoice Management System (eTIMS).
This is the first time that we have heard of the new system, and according to the document, it will help to improve the accuracy and efficiency of VAT reporting and compliance, resulting in increased revenue collection.
To add on that, there will be a reduction of the Corporate Income Tax (CIT) gap from 32.2 percent to 30.0 percent of the potential as stated in the KRA Corporate Plan.
This will be done through a combination of measures such as
- enhanced tax compliance
- improved tax administration and
- targeted policy interventions.
More importantly, and perhaps the industry’s first, is that KRA will integrate its tax system with the telcos to improve revenue collection.
This will involve working with them to ensure that they are reporting and paying the correct amount of taxes.
The draft further highlights that the government will be improving on the technical capacity of KRA through skills, technology and additional staffing.
The Authority says this will ensure it has the resources and expertise to implement the new measures and achieve its revenue collection goals.
