Civil society wants Kenya Revenue Authority (KRA) to be empowered to have unlimited access to the database of the Central Bank and the National Transport and Safety Authority (NTSA) as part of reform plans to trail wealth tax.
The proposal, given by the Fair Tax Monitor report, will enable KRA to train its gun on rich individuals and institutions who pay little or no taxes, thus improving the government revenue collection amid tight fiscal space.
This will help the government cut reliance on regressive indirect taxes such as Value Added Tax (VAT) and presumption taxes. It will simultaneously increase progressive direct taxes, especially on wealthy households and large corporations.
“KRA should have better access to databases from other public authorities such as the Central Bank, the vehicle registration office and others so as to empower the tax assessments of large business and rich and/or high-income individuals,” says the Fair Tax Monitor.
The report is produced by a consortium of five civil organizations, including Oxfam Kenya and Tax Justice Network Africa, advocating for a fair tax system that is equitable across all genders and social classes.
The proposal could see KRA nab tax cheats by pursuing individuals and corporations owning vast assets but enjoying the protection of other state agencies and companies. KRA currently uses vehicle registration details, import records, and Kenya Power records among other data to pursue suspected tax evaders.
Kenya has several times tried introducing wealth tax on the richer section of the society but this has flopped severally in the last four years, buoyed by a lack of political goodwill from the parliamentarians.
Different from income tax which applies to the majority of the population, wealth tax in Kenya often include charges on luxury goods, property taxes and capital gain tax (CGT) on assets like investments, real estate or business ownership, exclusive of debts.
“The previous situation and outcome of the political dispute over CGT sadly illustrates the power of the economic-political elite of Kenya to determine tax policies in their favour at the expense of the population at large and the fairness of the Kenyan fiscal system,” the report read in part.
Wealth tax is usually imposed on the super-rich, high-income earners, and large corporations with the intention of promoting a redistribution of resources and bringing better parity among taxpayers.
The wealth tax can effectively reduce wealth concentration at the very top since it might deter the rich from amassing more wealth on fears that the tax authority will compel them to pay a percentage periodically. However, the civil society is concerned that this can only be possible if KRA has adequate resources and manpower to go after the deep-pocked individuals and corporations.
KRA has been struggling to flag wealthy individuals who hide their vast sources of income but are involved in luxurious spending and amassing of property like homes, high-end cars, and other jewellery.
In November last year, the taxman announced that it will start trailing Kenyans portraying luxurious lifestyles on social media to ensure they pay taxes amid a surge in the number of wealthy individuals in the country.
The Wealth Report 2022 ranked Kenya as the second-largest luxury market in Africa after South Africa, in terms of high-net-worth individuals (HNWIs), cars, premium alcohol, and exclusive cruise ship trip among other things.
The recommendation by the civil society comes at a time when President William Ruto also renewed the bid to tax higher the rich more to raise revenue and cut dependence on loans.
Ruto, during his inaugural speech in Parliament in September, said that increasing taxes should reflect an individual’s ability to pay, achievable through a hierarchy pegged on wealth, consumption, income, and trade.
Kenya first tapped the idea of wealth tax in 2018, but it never materialized until last year when the National Treasury signalled a similar intention by intermitting plans for fiscal reforms, which included talks around wealth tax to boost revenue.
In the finance Act 202, Treasury increased CGT to 15% from the previous 5%, which comes into effect from January 2023.
Critics of wealth tax, however, point out that it is difficult to administer, can scare the wealthy and investors outside the country, and at times tends to encourage more tax evasion.
See Also:
