By Hanningtone Ilamenya
Kenya Revenue authority has entered a partnership with Kenya Bureau of Standards to tighten controls around imported goods amidst revelations that the country is losing revenue through weak systems.
Faced with pressure to deliver increased revenue targets, the taxman has resolved that all goods imported into the country shall have to be inspected at the source/country of origin.
The goods will have to enter Kenya already with a Certificate of Compliance (CoC) unlike currently where the same is obtained upon such goods entering the country.
The multi-agency approach is also aimed at curbing the flow of substandard goods into the country and was prompted by rampant cases of cargo mis-declarations and undervaluation to evade tax as well as ship in poor quality goods.
“This requirement has been found necessary in order to protect the safety and health of Kenyans in addition to securing tax revenues,” said Kenya Revenue Director General John Njiraini in a statement.
According to regulations issued in 2005, goods that are supposed to be inspected in the country of origin but arrive without CoC pay a destination inspection fee of 15% of the cost, insurance and freight value of the goods. The KRA-KBS partnership came shortly after Njiraini said that key decision such as those touching on valuation for customs have been left to staff members which has led to massive corruption that result in revenue leaks, affecting the taxman’s targets.
KRA’s officials at the Mombasa Port have been on the spot on several occasions for taking bribes to allow passage of substandard goods. They have also been accused of taking bribes to look the other way as importers mis-declare or undervalue their goods thus paying little in tax than what is actually required.
The two government agencies will thus have inspectors positioned outside the country to inspect and issue Certificates of Conformity only to finished products that meet Kenyan standards. The developments come at a time KRA has been blamed by treasury for below par revenue collections that were underwhelming.
KRA collected Sh152.7 billion on the first two months of 2015/16 financial year, an amount that Treasury Cabinet Secretary Henry Rotich described as unsatisfactory.
The Parliamentary Budget office also expressed concerns on the figures raised by KRA, fearing that the government may not fulfill its financial obligations as envisioned by the budget.
“This performance for tax revenues is still below the expected average for the period, raising doubts as to whether government will be able to meet its targets for the year,” said PBO in its report.
In the first two months of the 2014/15 financial year, the taxman collected Sh210 billion thus making this year’s numbers appear worrying. So serious was the situation that President Uhuru Kenyatta had to summon Njiraini to State House on October 19, to have him explain measures that are being taken to ensure revenue targets are achieved amidst the first quarter shortfall.
Several theories have been advanced for the missed tax targets. Chief among them is corruption within Kenya Revenue Authority ranks.
At the Mombasa port, the busiest in the region, some unscrupulous KRA staff are said to have formed a cartel that is fleecing the taxman off billions of shillings through under declarations and/or outright tax evasion.
It is claimed that the cartel also includes staff from Kenya Ports Authority and the Container Freight Station Operators.
President Kenyatta has since issued orders to have KRA staff undergo a lifestyle audit to weed out corrupt individuals said to be costing the country billions of shillings in lost revenue.
“I am directing National Treasury to work with the KRA board to ensure speedy implementation of an appropriate staff vetting framework,” said Kenyatta during the ceremony to reward taxpayers on October 15.
Besides shifting of CoC issuance to the country of origin, it is understood that KRA has established other mechanisms aimed at monitoring and reporting any suspicious activities by its staff.
These include daily audit of cargo clearance at the port of Mombasa, monitoring the Container Freight System (CFS) to seal loopholes, improving stock management and installation of CCTV equipment to monitor movement of goods, particularly at night.
Kenya Revenue Authority has an annual revenue target of Sh1.2 trillion this financial year and any failure to hit the number will result in serious financial difficulties by the government, which may force it to resort to borrowing as the only means of funding budgetary allocations.
