Since time immemorial and in many jurisdictions, taxation has been perceived as a hard nut to crack. In light of this, a top global agenda on tax administration has been an exploration of possible avenues that will see the simplification of the tax processes to the simplest level possible.
Many scholarly findings unanimously posit that one of the most important outcomes of a simplified tax system is improved tax compliance. In his article titled Tax Simplification: Issues and Options (2001) published on Brookings in 2001, William Gale notes that successful simplification of the tax processes has numerous benefits. Fundamentally, Gale notes that simplification of tax processes means a reduced cost of compliance in terms of time, money, and mental anguish.
The discussion on the simplification of the tax processes is very live in the Kenyan tax jurisdiction. The Kenya Revenue Authority (KRA) in conjunction with various economic and tax administration think tanks have been on the frontline cracking the brain on the best way to simplify tax administration in Kenya.
One of the platforms that KRA uses to engage scholars and members of the public on tax matters is the annual tax summit. The annual tax summit, now in its fifth year, has availed a perfect opportunity for fruitful engagements that inform important policy decisions on tax administration in this country.
This year’s annual tax summit is anchored on the theme “tax simplification and digitization for economic transformation”. The theme resonates well with the global agenda mentioned earlier on the simplification of the tax administration process. The theme also aligns with the contemporary mass digitization of processes.
However, there has been a two-sided coin of perception when it comes to automation of the tax processes. On one hand, automation of tax processes is viewed as a crucial step towards conforming to the contemporary digital era. One of the merits of digitizing the tax processes is the enhancement of efficiency in tax administration.
Flashback to some years back when tax administration was largely manual, it would take inordinately too long to have crucial services delivered. For instance, before the implementation of iTax, taxpayers had to visit KRA offices in person to apply for a tax compliance certificate, a process one can now initiate from the comfort of their house or office.
Prior to iTax, submission of tax returns, especially the annual income tax returns, was a formidable nightmare, thanks to the long and meandering queues that dotted the deadline. iTax, a technological advancement measure has now put an end to this phenomenon. The efficacy of iTax in doing away with long queues was more pronounced during this year’s filing season where only a handful of taxpayers showed up on the last day.
On the other hand, though not totally against the digitization of tax administration, some schools of thought see it differently. They term digitization of tax administration an obstacle to tax compliance, especially in countries with low uptake of information and communication technology. This begs the question: do we maintain the manual tax administration and lag behind inefficiency, or should we digitize the system in a simplified manner for enhanced efficiency? The annual Tax Summit has for the fifth year now provided the perfect ground for such conversations affecting tax administration in a country like ours.
This year’s tax summit, just like previous tax summits, provides an opportunity for members of the public and scholars at large to air their views on various tax policies and reforms with a view to making them suitable for administration in our jurisdiction. In other words, the two-day annual tax summit promotes the spirit of public participation on tax matters. The Tax Summit shall be held at the Kenyatta International Conference Centre (KICC) on 16th and 17th October 2019. It brings onboard renowned local and international tax and economic affairs experts with a wealth of experience that suits the teething issues on tax administration.
The resolutions reached during the Annual Tax Summit play a key role in informing KRA’s next course of action in the improvement of tax administration in Kenya. During the 4th Annual Tax Summit held last year, for instance, a key resolution was a need for KRA to institutionalize engagements with the informal sector.
Though contributing significantly to the Gross Domestic Product of a country, it has been a tough task to bring the informal sector into the tax net. As a result, KRA has been organized a series of tax seminars and sensitizations with the informal sector to better understand the sector. From these engagements, KRA has learned that the majority of the sector players are willing to be tax compliant. All they require is facilitation and information on how to do so. One of KRA’s tax base expansion strategies is bringing the informal sector within the tax net.
KRA is on course implementing other resolutions arrived at during the previous tax summits for purposes of making tax administration more efficient and at the same time improving the tax payment experience. The outcome of this year’s Tax Summit will be a landmark input in the transformation journey of tax administration in Kenya.
By Grace Wandera, head of the Marketing and Communication Department at KRA