Enhancing tax compliance among briefcase companies in Kenya
IOSR Journal of Humanities and Social Science
KRA continues to struggle with enforcement of voluntary compliance amongst taxpayers. Various approaches have been adopted to try and solve the problems. The problem is however bigger and "Tenderpreneurs" continue to be a historic thorn in the flesh of the Authority and other government agencies. This paper proposes several approaches to mitigating this problem. Firstly, a flat simplified rate of tax of 20% based on the VAT to GDP ratio, tax to GDP ratio and benchmarked with the legal MRI rate
... the legal MRI rate of tax is proposed. Analysis of data from 26 counties reveals that had the law established such a system earlier, KRA would have collected at least Kes 8 billion for the financial year 2015/2016. The paper also proposes a Transaction-Based Income Tax as a mandatory tax type for all small taxpayers. Exemption from this regime to the formal regime is proposed to happen through a "Class A" certification, which is only given based on a satisfactory tax payment history for the taxpayer and execution of a tax bond modeled along what is used under the East African Community Customs Management Act 2004. The underlying principles in the suggestions are simplification of processes, corporate gatekeeping and virtual presence of KRA. It is proposed that should the proposals be found worthy of attention, rigorous risk analysis and impact assessments be conducted before application.