KRA told to strengthen research unit to ensure predictable tax regime

Kenya Revenue Authority (KRA) has been told to strengthen its research department to enhance innovation and ensure the predictability of the tax regime.

National Treasury Cabinet Secretary Njuguna Ndung’u said there has to be innovation in designing tax policy and tax instruments as well as tax collection. He said the ultimate plan by the government is to ensure that taxes are predictable and with minimal distortion of the market.

“This will give room for businesses to consciously make investment decisions without worrying about the uncertainty and costs associated with reviews of taxation laws,” Ndung’u said during the launch of Taxpayers’ Month at Customs House in Mombasa.

Tax policy design

“If you don’t have a strong research department, then you cannot be innovative… don’t rely on me to give you the elasticity of a particular demand structure of a good because you have to internalise it,” he stated.

“For innovation, you have to have a department that is innovating in terms of tax collection, that is innovating in terms of tax policy design, and even design of tax instruments …That is where we are going,” the CS said.

He further said: “We want to make sure that taxes are predictable, we want to make sure that taxes do not distort the market, we want to make sure that a tax instrument does not destroy the demand structure of the product in target.”

Once the above is achieved, he said optimal tax revenue will be generated for the government to plan for its citizens. “With a predictable tax regime, we will be assured of optimal tax revenue for the government to plan. And that is a better story to tell that will change the conversation completely and that is where we want to be,” Ndung’u added.

On the Tax Amnesty programme, the CS said besides being a means of giving back to society, it is one of the government’s fiscal policy measures aimed at cushioning Kenyans and strengthening economic resilience during the adverse domestic and external headwinds being experienced globally.

He said the government is cognizant of the current changing environment and will continue to support private businesses’ capacity to adapt through reforms. This, Ndung’u added, will create business value for entrepreneurs to promote economic growth. Tax amnesties, the CS stated, are projected to bring in additional revenue as taxpayers voluntarily report and pay taxes that may never be collected by the Government.

“The amnesty programme is expected to improve tax compliance as tax administrations learn from taxpayers’ previous behaviours, thereby allowing them to plan better,” added Ndung’u