Is KRA’s simplified return filing process the solution to Kenyans’ last minute craze?
By Albanus Muindi
Over the years, Kenyans have been known to wait for the last minute to submit their tax returns. While some see it as the “Kenyan way of doing things”, for others it has been because they find the system and process quite complex. There are also those who simply do not know whether they are supposed to file their returns or not.
The filing of returns for persons with employment income only was suspended in 2011then re-introduced by the Finance Act 2012. The process was manual until the introduction of the online system in 2014, during which most of the taxpayers still submitted their returns manually. Manual filing was then suspended fully in 2015 and all taxpayers had to shift to the online system.
Going by the data since the implementation of the online filing platform to date, many taxpayers still do not manage to file before the deadline. Given the convenience of the online filing platform, one would expect that the compliance levels would rise instantly. This has however not been the case, and can be explained by two reasons. One, the taxpayers have not used online platforms before and only imagine them to be complex, and two, could be defiance because of the repetitive compliance requirements that oblige the individual tax payers to provide information already provided by their employers through the monthly PAYE returns.
An earlier attempt to use hefty penalties to push taxpayers to comply with the filing requirement proved futile. Through the Tax Procedures Act 2015, penalties were increased 20 times from the Sh1,000 that had been in operation since the re-introduction of the filing of the return to Sh20,000. There was however no significant change in compliance levels that could directly be attributed to the high penalties imposed.
The Cabinet Secretary for National Treasury, during the 2018 budget speech reading, revised the penalties downwards from twenty thousand shillings (Kshs 20,000) to two thousand shillings for an individual who submits a tax return after the due date. On that note: the 2018 self-assessment return is due for filing on or before 30th June 2019.
KRA does not extend deadlines anymore. My hope is that this year and going forward, taxpayers will take advantage of the goodwill KRA has extended and we shall see increase in compliance levels. The process is now simple and less costly.
The Revenue Authority sees compliance as one of the ways it can use to collect more taxes to meet the revenue shortfalls. It has therefore been making efforts to boost compliance through deliberate actions to ease the process of filing returns.
In light of this, KRA has introduced a two-step tax return filing plan where individual taxpayers with employment income only will fill in data on pension and annual relief only, with most of the data already provided by the employer, through the monthly PAYE returns. It will be interesting to see if this move is a step towards suspension of filing returns for individuals with employment income only yet again like our country neighbors Uganda and Tanzania.
We now have only less than a month left to submit our self-assessment returns, and with the reduced hustle, we will then establish whether it is the KRA online system or Kenyans just enjoy the last minute rush.
Albanus Muindi is a tax advisor at Andersen Tax in Kenya: Albanus.Muindi@andersenTax.co.ke
Andersen Tax, Kenya is a member firm of Andersen Global. Andersen Tax global is an international association of legally separate, independent member firms comprised of tax and legal professionals around the world. Established in 2013 by U.S member firm Andersen Tax LLC, Andersen Global now has nearly 4,500 professionals worldwide and a presence in over 139 locations through its member firms and collaborating firms.