National Treasury Cabinet Secretary John Mbadi has challenged Kenya Revenue Authority to be more innovative and technologically adept to enhance revenue collection.
While KRA reported an 11.1 per cent increase in overall revenue for the financial year 2023-2024 to Sh2.407 trillion, it failed to hit its Sh2.5 trillion target even after it was revised downwards from Sh2.768 trillion.
The dropping of the Finance Bill 2024 following countrywide protests adds pressure on the taxman who is expected to collect about Sh3 trillion to support funding of the 2024-25 budget, which has since been reduced to Sh3.87 trillion from Sh3.99 trillion.
The government was expecting an additional Sh344.3 billion in revenue through the Finance Bill, 2024.
Speaking at an introductory meeting with KRA’s top leadership and staff, CS Mbadi emphasised the need for continuous modernisation in tax administration to streamline business processes, leverage cutting-edge systems, and simplify tax transactions.
“Our modernisation journey must align with our objectives and those of taxpayers. This approach will not only benefit taxpayers but also significantly boost our revenue mobilisation efforts,”Mbadi said.
Highlighting the transformative power of technology, the CS noted that it is crucial for reforming taxpayer services, improving operational efficiency, and enhancing revenue collection.
“Our commitment to this cause is evident in our national strategic policy reforms and the ongoing modernisation of revenue administration processes,” he added.
Further, the CS urged KRA to expand the tax base, particularly in sectors that have traditionally been hard to tax.
This, he said, will help protect existing businesses from excessive taxation. He said Treasury will support KRA by developing policies to guide in revenue mobilisation.
According to Mbadi, instruments such us The National Tax Policy will support the expansion of the tax base, enhance fairness and equity in the tax system and create certainty and predictability in tax rates and tax bases.
“Through the policy, the KRA must ensure that we achieve higher tax compliance, enhance tax-payer experience and reduce tax expenditure to minimize market distortions and tax refund pressures. As outlined in the policy, we shall develop a framework for granting tax incentives that are time-bound and growth-oriented,” he said.
He noted that implementation of short term policies such as the Medium-Term Revenue Strategy (MTRS) can enable KRA effectively collect and meet its revenue targets.
“I will in the course of the fiscal year chair the meeting of the Steering Committee on the Implementation of the Medium-Term Revenue Strategy to ensure we are all on track. The objective is to achieve tax to GDP ratio of 20 per cent over the medium term,” he noted.
During the meeting, KRA Commissioner General Humphrey Wattanga said the authority is set to revamp its IT infrastructure to establish reliable systems capable of responding proficiently to business demands.
He stressed the importance of modernisation in improving operational efficiency and enhancing KRA’s ability to identify and address potential tax evasion through data-driven decision-making.
“The adoption of cutting-edge technologies, such as data science, machine learning, and Artificial Intelligence (AI), will strengthen our operational efficiency, ensure compliance, and elevate service delivery standards,” he said.
He added that this technological development would not only simplify tax administration but also boost overall revenue performance and create a seamless experience for taxpayers.
Wattanga confirmed that KRA will continue implementing effective initiatives and robust policy reforms, to enable the authority fulfil its mandate of collecting revenue on behalf of the government.