Kenya has run out of the new Internet-enabled electronic tax registers (ETRs) that relay real-time data on daily sales to the Kenya Revenue Authority (KRA), a hitch that could ground operations of some traders in five days.
Kenyan manufacturers and traders are racing to upgrade their ETRs at their premises ahead of the July 31 deadline to avoid paying a Sh1 million fine or a jail term of three years.
Without the gadgets, traders would be forced to stop operations or apply to the Commissioner of Domestic Taxes for an extension of time to comply, which should not exceed six months
“We have run out of the gadgets we had stocked. We did not expect they would run out this fast. We are awaiting shipments before Friday to fulfil demand which has been so huge,” said a supplier based in Nairobi’s CBD who requested anonymity for fear of losing their licence.
The KRA did not immediately respond to a request for comments on the supply constraints. But a KRA insider said the stock-out is causing them a nightmare since some traders have already indicated that they would sue to compel the taxman to extend the deadline.
The taxman had earlier sought to assure traders that the gadgets were in plenty and would not run out ahead of the implementation deadline.
Sixteen suppliers are mandated by the KRA to supply the crucial gadgets.
The law requires all businesses with an annual turnover of at least Sh5 million to have ETRs.
Under the new system, the KRA will receive sales and invoice data from all registered firms and traders daily in a fresh push to boost revenue collections and curb tax evasion.
The new technology will deepen scrutiny of traders’ transactions.
The move comes as the taxman moves to seal revenue leaks and boost State coffers in the race to reduce reliance on public debt.
Traders will also be required to seek the taxman’s permission to perform any other business the next day under the system, meaning incorrect or incomplete data logged the previous day could lock them out.
“If a VAT-registered taxpayer does not comply within the specified period then we invoke section 53 of the VAT Act which says that you will either be fined Sh1 million or three years imprisonment or both if you don’t comply within the specified timeline,” Hakamba Wangwe, the chief manager in charge of Tax Invoice Management System operations, said earlier.
The new ETR will upgrade the current manual tax registers that store sales data for scrutiny by the KRA after 30 days. “The system seeks to enhance compliance. With the current situation where we have most of the processes being manual, we don’t have visibility of Vatable transactions,” said Ms Wangwe.
Suppliers said on Monday they were recording booming business amid the scramble to comply by Kenyan firms.
“We are charging from Sh45,000 to Sh120,000 for the ETRs and about Sh80,000 for the billing software,” said Charles Mwaura, the chief executive of Wisepower Technologies, one of the KRA-approved suppliers.
The new ETR will be connected through the Internet to the KRA’s systems, allowing it to monitor all transactions in the traders’ point of sale and invoicing systems.
Besides the upgraded ETR software, traders are supposed to procure software for the devices.
“The idea for KRA is to use technology to track sales on a real-time basis. So when someone makes a sale they will know and the buyers’ iTax page will also be updated,” said Nikhil Hira, a tax expert and business partner at Kody Africa LLP.
The KRA under Commissioner-General James Mburu has been using various technologies to pursue suspected tax cheats.
The tax agency, through its enhanced tax collection and recovery efforts, anticipates that it will exceed its revenue collection target by Sh140 billion in the current fiscal year, eyeing Sh2 trillion in total collections for the period.
As part of the shift to tech, the KRA said recently its workers would start wearing body cameras in the latest bid to curb tax cheating and staff bribery.