By CPA Samuel Gikonyo Maingi
Essential Information on Taxation Should be Easily Obtainable
In simple term Tax Compliance is the act by tax payers to pay any amounts of tax due to the tax body. In Kenya this body is known as Kenya Revenue Authority (KRA).
Globally, income taxes are the main source of revenue to governments and the revenueauthorities when meeting their budget agenda. Revenue bodies continue to devise functioning policies to enhance tax compliance to all cadres of taxpayers.
Tax compliance represents multi-faceted measures of taxation relating to payment, reporting andfilling of taxes.
Voluntary tax compliance has no state enforcement to taxpayers to comply with the required tax law. The citizens do it voluntarily and always provide relevant and accurate information relatingto their income as opposed to involuntary tax compliance. On the other hand involuntary tax compliance goes against the wish of tax administrators who view their role as being the facilitator to provide efficient information on taxation and help reduce tax gap and non-compliance.
The Government through Kenya Revenue Authority has come to the forefront in drivingmomentum aimed at minimizing cases of income tax evasion and ongoing crackdown to tax avoidance, tax evasion and correcting the imbalance in the tax system via policy formulation andimplementation.
Tax compliance in Kenya is a challenging affair not only to the less educated individuals but also to the educated citizens who form the base of taxpayers through the involvement in incomegenerating activities. This makes tax compliance among SME’s mostly operating in the informal sector to be very low.
Tax compliance among the SMEs is concavely related to poor business record keeping, low sales turnover, and changes in form of business ownership, business transitions and unstable businessoperations.
The critical role of the SMEs taking active role in tax compliance is to be part of economicdevelopment and foster provision of public goods and services to enhance delivery of services.This necessitates the essence of understanding the role of SMEs in the economy and availingsupportive measure to help them in tax compliance transformation.
KRA is therefore mandated to determine the effects of tax evasion detection and penalties on tax among SMEs, to establish the effects of corruption on tax compliance among SMEs, toinvestigate how tax payers’ attitude and behaviour affect tax compliance among SMEs, toinvestigate the impacts of culture on tax compliance among SMEs. By doing so they will be able to come up with measures that will ensure compliance to tax payment.
Areas that need improvement on tax penalties is the need to ensure all state agencies play their role very well. KRA should continuously advocate for record keeping by providing online and offline services to enable taxpayers have proper records that they can use to secure funding.There is much needed support from the government to value the hero and heroine as an example to others who can rise in the same line of service to the nation. Tax amnesty should be well communicated to enable those willing to comply and start a fresh. Much is needed and KRAmust spearhead and provide tax automation services at a negotiated fee given that taxpayers are asset to the nation at large.
Therefore it is relevant to establish a broad information base on key determinants of tax compliance among SME’s to be in a position to address issues of tax malpractices involving tax avoidance and tax evasion.
Some of the Determinants of Tax compliance includes;
Proper Record Keeping
Tax bodies should have a strong support system in enhancing business record keeping that will be in charge of information dissemination to taxpayers’ transactions records at personal level as it has a strong and positive correlation to tax compliance.
Imposing Penalties for non-compliance
The taxman should ensure that the tax payer suffers the cost of penalties and fines as stipulated by the KRA to encourage the SMEs to comply in tax payment.
In this regard KRA has to ensure that they set out reforms which are efficient and effective in tax collection so that they can improve their revenue base. Therefore perceived fairness in the administration of the tax system has been thumbed as one of the main attributes of good tax model in the economy with a critical role in tax reporting behaviors.
Effectiveness of the Government in utilization of the tax revenue
When the government provides its people with public properties and services in a well-organized and reachable manner then taxpayers will be willing to comply with paying taxes.
Tax Knowledge and education
SMEs must be knowledgeable about the different compliance measures and requirements so that they can comply in tax payment accordingly. When the SMEs receive proper education through trainings and seminars by KRA they will be able to know more about tax compliance.
High tax rates leads to non-compliance by many SMEs who feels that their profit will be consumed by the high tax rates. It is therefore important for the tax man to ensure favorable tax rates to increase compliance.
Finally, areas that need improvement on tax penalties is the need to ensure all state agencies play their role very well. KRA should continuously advocate for record keeping by providing online and offline services to enable taxpayers have proper records that they can use to secure funding.There is much needed support from the government to value the hero and heroine as an example to others who can rise in the same line of service to the nation. Tax amnesty should be well communicated to enable those willing to comply and start a fresh. Much is needed and KRAmust spearhead and provide tax automation services at a negotiated fee given thattaxpayers are asset to the nation at large.
More importantly for the government to improve collection of tax, the necessary information regarding taxation should be made easily obtainable for instance through channels as the KRA centers that are easy for taxpayers to reach and the filing procedures should be made simple.
The writer is an Accountant-Sortmasters Investments Ltd