Tax ambition should not stifle prosperity
By PD columnist, June 28, 2022The financial year ends in two days and indications are the Kenya Revenue Authority is expected to register impressive figures following a raft of strategies to raise revenue. Among the new strategies include the use of artificial intelligence, data mining and use of live cameras to catch tax cheats.
The good news is that the taxman has been able to increase tax revenues significantly and experts say the authority will collect Sh2 trillion in the next financial year.
In spite of the ravages of Covid pandemic and a sharp rise in the cost of living, the National Treasury increased the tax target by demanding a further Sh33.7 billion on account of good performance.
This shifted the goalpost from the initial Sh1.71 trillion in the fiscal year ending June to Sh1.74 trillion, setting an even more ambitious target meant to help narrow the fiscal deficit in Kenya’s ambitious Sh3.3 trillion budget.
Given the increasing debt obligation as local and international debt surges towards Sh9 trillion, the pressure on the taxman is expected to increase, which in turn will be channelled to firms and the people.
This is where it will get dicey, if it already hasn’t gotten there, and there is a need to ensure that the pressure is not directed to the poorest among our ranks and even the productive sectors.
During such tough times, the taxman would make a lot of economic sense if officers resort to soft tactics to ensure that they don’t kill the goose that lays the golden egg.
The Voluntary Tax Disclosure Programme that sought to waive penalties accrued for individuals who failed to disclose any tax that was due over the last five years is a welcome move.
Introduced through the Finance Act 2020, the measure was meant to offer affected taxpayers relief on penalties and interest on any tax liability disclosed in respect to the five years running to June 2020, however, there are claims that it has not been effective due to intimidation.
Tax targets must not only be realistic but also practical and this requires an honest conversation with the Treasury to ensure that goalposts are not shifted at the drop of a coin but through properly laid down mechanisms.
This will ensure that other channels such as austerity measures and debt management strategies come in handy to give relief to the taxpayers.