Paying Taxes in Kenya is very crucial for the growth of the economy of our country. Taxpayers in any system of taxation are continually faced with the choice of being honest in their tax affairs, or engaging in a course of conduct that involves deception and deceit. Taxpayers consider many factors when they are confronted with the decision whether to comply with the law. These factors include: the rates of taxation, including the total tax rate when all taxes, levies, and charges are considered; the fairness or perceived fairness of the system, the
efficiency and effectiveness of the tax agency, the ease of filing and paying, the complexity of the tax laws, the extent of corruption, real or perceived, and the fiscal integrity of the Government and its wise or wasteful use of public funds.
Three Principal Laws for Paying Taxes in Kenya
The three principal laws for Paying Taxes in Kenya which provide for ninety nine percent of total government revenue are;
• The Kenya Income Tax Act
• The Kenya Value Added Tax
• The Customs and Excise Act.
Other laws that provide about one percent of total revenue are:
• The Road Maintenance Levy Fund Act
• The Widow’s and Children’s Pension Act
• The Air Passenger Service Charge Act
• The Parliamentary Pensions Act
• The Entertainment Tax Act
• The Stamp Duty Act
• The Traffic Act
• The Betting, Lotteries, and Gaming Act
• The Transport Licensing Act
• The Directorate of Civil Aviation Act
• The Second Hand Motor Vehicle Purchase Act
A breakdown of the revenue provided by these acts, which has generally been consistent over the last few years, reveals the following: The corporate income tax rate, which was originally set at forty five percent, has been reduced over the years, and was fixed at thirty percent for residents. For branches of non-resident companies, the rate is thirty five point seven percent. For small businesses with there is a turnover of less than KSh5 million. Prior assessments of Kenya have identified the country’s tax burden as excessive compared to other countries. When all taxes, levies, and charges are considered, the total corporate tax burden is about fifty percent. In addition, the burden of gathering and analyzing financial data, filing all the forms required, and making all the various payments throughout the year is massive and extremely time-consuming. Although these burdens have been noted and widely publicized, and numerous recommendations made to improve the situation, nothing has been done to implement the recommendations.
Implementing Institution of Paying Taxes in Kenya
The Kenya Revenue Authority is one of the implementing institutions of Paying Taxes in Kenya. It was established in 1995 as a semi-autonomous institution charged with the responsibility of assessment and collection of revenue and the administration and enforcement of all revenue laws. The Kenya Revenue Authority is governed by a Board of Directors which makes policy decisions to be implemented by Kenya Revenue Authority management. The Chairman of the Board is appointed by the President. The Chief Executive of the Kenya Revenue Authority is the Commissioner General, who is appointed by the Minister of Finance.
Key implementing institution
The vision of the Kenya Revenue Authority in accordance to Paying Taxes in Kenya, according to its Taxpayer’s Charter, is to “be the leading revenue authority in the world, respected for Professionalism, Integrity, and Fairness.
In summary, Kenya Revenue Authority has:
• Established an Enforcement Division, with a staff to provide for a deterrent to evasion by initiating prosecution of taxpayers who willfully violate the tax laws.
• Established an Internal Affairs Division to create a deterrent to abuse of office, and to provide for administrative disciplinary actions, as well as prosecution, against those who do.
• Issued a Taxpayer’s Charter or Bill of Rights and Obligations for both taxpayers and the Kenya Revenue Authority to follow.
• Established a Taxpayer Service Division to provide education and service to taxpayers.
• Enacted electronic tax registers requirements.
• Initiated electronic filing on a pilot basis with plans for universal implementation.
• Established an appeals process with three levels of appeal.
• Reduced clearance times at the Mombasa port of entry with “24/7” hours of operation.
• Established a one-stop processing center at Kenya Revenue Authority headquarters for import/export documents.
Supporting Institutions for Paying Taxes in Kenya
Supporting Institutions for Paying Taxes in Kenya is very crucial. There is considerable support within Kenya for immediate and effective reform of the system of taxation. Many influential stakeholders are involved, including two associations representing chartered accountants and certified public accountants, the Institute of Economic Affairs, accounting firms, law schools, and university professors. The Kenya Revenue Authority activity encourages stakeholder involvement, and has invited representatives from the private and public sectors to become involved in Paying Taxes in Kenya
Read more in Business Training in Kenya.
Recommendations of Paying Taxes in Kenya
One of the ways to enhance Paying Taxes in Kenya is to enact past recommendations that remain unaddressed.
Strengthen the Kenya Revenue Authority through a number of policy initiatives.
Create an Audit System as the foundation for a computerized model designed to identify incorrect tax returns as they are filed and processed, using specific, established quantitative criteria. This helps in Paying Taxes in Kenya
Establish an independent administrative appeals unit within the Kenya Revenue Authority that reports directly to the Commissioner General and is charged with settlement authority.
The Kenya Revenue Authority helps in Paying Taxes in Kenya by should become more aggressive in identifying taxpayers who willfully and intentionally evade taxes, and vigorously pursue prosecution of taxpayers on a selective basis.
The Kenya Revenue Authority should improve its outreach to small and medium taxpayers through the publishing of instructional booklets that explain various sections of the tax law in friendly and easy to understand language.
Policymakers should create legislation that establishes third-party reporting requirements to the Kenya Revenue Authority, with internal Kenya Revenue Authority verification.
The Kenya Revenue Authority should establish a clean file for all transactions between the Kenya Revenue Authority and the taxpayer. This should include all assessment, fines, penalties, and payments made by the taxpayer.
The Kenya Revenue Authority should adopt a single PIN for both income taxes and VAT.
The Kenya Revenue Authority should speed up the adoption of electronic filing. It fastens up Paying Taxes in Kenya.
The Kenya Revenue Authority should engage in more aggressive enforcement of instances where tax inspectors abuse the power of their office. This will help in Paying Taxes in Kenya
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