The National Assembly’s Finance Committee wants small traders exempted from plugging their business systems into Kenya Revenue Authority (KRA)’s iTax portal, which could deal a blow to the Treasury’s aim to collect data from third-party sources to boost compliance.
The Finance Bill 2024 has proposed a penalty of Sh2 million for every month that a taxpayer refuses to integrate a data management or reporting system established by the KRA with i-Tax, the system that enables taxpayers to file returns electronically and make payments.
But as part of changes to the Finance Bill 2024, the Kimani Kuria-led committee wants businesses with an annual turnover of less than Sh8 million exempted from this requirement.
“The committee notes that the proposal does not specify the class of companies and entities that will be subject to the provision and neither does it specify the timeline for which a taxpayer would be required to comply before the penalty applies,” reads the report by the Finance Committee to the National Assembly.
“Therefore, the committee proposes that the period after notice be up to one year and that the provision will not apply to entities with a turnover of less than eight million shillings.”
The KRA has been pushing for increased use of data and linkages between its system with third parties such as banks and mobile money payments like M-Pesa to spy on taxpayers’ activities, use of Internet-enabled cameras at excisable goods processing plants, and full rollout of digital electronic tax registers.
The KRA’s enforcement units have also been using various databases to pursue suspended tax cheats, including bank statements, import records, motor vehicle registration details, Kenya Power records, water bills, and data from the Kenya Civil Aviation Authority, which reveals individuals’ assets.
Vehicle registration details are also used to smoke out individuals driving high-end vehicles but have little to show in taxes remitted.
In the Finance Act 2023, the Treasury introduced a provision in the Tax Procedures Act that allowed the Commissioner to establish a data management and reporting system for submitting electronic documents, including detailed transactional data relating to those documents.
In the Finance Bill 2024, the Treasury wants the Commissioner to require businesses to integrate this data management and reporting system with the iTax, failure to which the taxpayers will be penalised.
The Treasury has been scouring for data from third-party sources such as telecos to profile taxpayers through M-Pesa and bank account details.
The Finance Bill had also proposed to give the KRA unfettered power to access sensitive personal information by amending the Data Protection Act, an amendment that has been rejected by the Committee.
Treasury Cabinet Secretary Njuguna Ndung’u had proposed to amend the Data Protection Act to exempt the KRA from the requirement of seeking court orders before accessing sensitive personal information held by data controllers and processors including banks, telcos, utilities and schools.
