Tuesday, August 23, 2016

KRA should tax income from corruption and fraud

Latest: Corruption and Money Laundering.

KRA should tax income from corruption and fraud.


National Treasury has for the 2016-17 fiscal year set an ambitious revenue collection target for the Kenya Revenue Authority (KRA). This calls for enhanced tax base and improved revenue administration processes. It's in line with this expectation that the taxman will have to employ the following strategies: the enforcement of the Tax Procedures Act, 2015 (TPA Act) and the widening of the tax dragnet to rope in income from illegal and immoral sources.
The Act aims to actualise the taxation principle of simplicity, with the overarching objective being to harmonise the tax administration process as one way of making tax compliance easier. It brings all the tax procedures in Kenya under one regime, with the exception of minimal specific procedures provided for under the specific tax legislations. It provides a punitive penalty amounting to double the tax avoided for those taxpayers who are guilty of involvement in tax avoidance schemes.
It introduces novel ideas that are crucial in simplifying the tax legislation and also significantly reduces room for doubt on both the part of the taxpayer and that of KRA, thus setting ground for a more robust and efficient tax regime. This will hopefully translate to more tax revenue. Under this law, and reminding us of the case of Al Capone the Chicago crime boss, it is now easy to secure a conviction for tax evasion than for corruption under the Anti-Corruption and Economic Crimes Act.
Taxation of illegal income has been a topic of debate in different jurisdictions. Tax authorities, in their zest to maximise revenue collection, have argued that proceeds of trade is income, even if the trade was illegal. To mention but a few are the celebrated cases of Mann - Vs - Nash and Commissioner of Inland Revenue - Vs - Aken.

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