The Kenya Revenue Authority has struggled to track and register potential taxpayers across the country due to the lack of an integrated national system to identify taxpayers.
This widespread issue has led to the exclusion of a significant proportion of potential taxpayers from being registered in the tax system, resulting in major revenue losses for the government over an extended period of time.
To address this pressing problem, a group of tax experts from leading institutions including the Institute of Certified Public Accountants of Kenya, the Institute of Economic Affairs, and international consultancy firm Deloitte East Africa have recommended implementing a Single Lifetime Identifier system for all potential taxpayers. This would aid KRA in maximizing its tax collection potential nationwide.
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In testimony before Parliament, the tax experts emphasized that introducing Personal Identification Number categorizations for employees, students, sole proprietor businesses and partnerships is necessary to prevent an abundance of dormant PINs across the system. Separate PINs for personal and business purposes would allow the authority to more efficiently track and register individual and corporate taxpayers.
The proposed National Tax Policy additionally seeks to tackle the unpredictability of fluctuating tax rates by requiring a comprehensive review of all tax laws every five years. The extensive policy also recommends developing a clear framework for identifying tax incentives and addressing complex challenges related to international taxation treaties and agreements.
The Treasury report aims to resolve systemic issues including the rapid growth of tax expenditures now estimated at 2.6 percent of the nation’s Gross Domestic Product as of 2021. Other targeted problems include difficulties taxing emerging digital economies, low compliance rates, and protracted delays in the resolution of tax disputes.
Comprehensive implementation of the new tax policy is expected to empower the revenue authority to maximize tax collection by accurately identifying all potential taxpayers and reducing redundant PINs.
Tax experts contend establishing a single lifetime identification system for all taxpayers would fundamentally strengthen the revenue authority’s tax collection capabilities. Distinct PIN categories for personal and business use would allow more precise tracking and registration of taxpayers across Kenya.
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