Melissa Juried Kriebel
“This year’s National Taxpayers’ Day comes at a time of tremendous crisis as well as an immense opportunity. It, therefore, calls for sober reflection, radical change and resolute action to make our tax administration fairer and better aligned with the revenue policy of a nation in pursuit of self-reliance.
“As I stated on assuming office, the state of our public finances is unsatisfactory. Given this, how we proceed will determine whether we are facing a threat or an opportunity. Difficult decisions must be made to put matters in good shape. The false comfort of a financial bandage must come to an end because we are risking short-term comfort in place of sustainability in the long term.
“We have already taken the direction of retiring expensive, unsustainable consumption subsidies in favour of investing in production while cutting off the fat in the national budget to eliminate wasteful and irrational expenditure to produce savings which will finance urgent critical interventions.
“We continue to live way beyond our means with an unsustainable proportion of our revenues going to servicing debt. Under these circumstances, critical government services cannot be provided adequately, or at all, owing to budgetary constraints. Similarly, essential projects cannot be undertaken for the same reason.
“The implementation of our government’s Plan for rapid and inclusive socio-economic transformation of our country depends on a robust revenue growth rate and a well-managed budget deficit. We do not have the luxury of gambling with our destiny by living beyond our means, and neither can we afford to fail in implementing the public finance management agenda.
“I note the steady growth of revenue mobilized by the Kenya Revenue Authority since 2020. Whilst this is encouraging, the active tax base remains far short of its potential. At the same time, it indicates the willingness of taxpayers to meet their obligations under a fair, professional, facilitative framework.
“The upshot, in sum, is that there is evidence of tremendous scope to expand our taxpayer numbers by engaging eligible and willing taxpayers. It is time to do the fair thing by supporting patriotic taxpayers who fulfil their obligations by reducing the number of free riders and enlisting more taxpayers in the nation-building project.
“A huge obstacle to realising our national revenue targets is that in practice, the tax administration has traditionally been a repressive, menacing affair, which resembles extortion. This extinguishes taxpayer incentives and diminishes the prospects of an expanded tax base, pulling Kenya back from its national revenue potential and denying its citizens’ critical services and development programs.
“Tax revenue mobilization is a crucial dimension of state sovereignty. The ability to finance national budgets defines true national independence. Those taxpayers who continue to perform their duty of remitting due taxes advance this agenda, thereby engaging in the exemplary performance of patriotic duty.
“A day like this is, therefore, most appropriate for appreciating and indeed honouring the contribution of these outstanding individuals and corporate citizens in safeguarding, upholding and enhancing Kenya’s sovereignty. I salute you and, on behalf of a grateful nation, I celebrate you. It is important to let you know that your commendable contribution to national self-reliance, sustainable development and citizen well-being, is noted with profound appreciation.
“To signify our appreciation of these distinguished taxpayers, we must move decisively and efficiently to increase the number of taxpayers of all categories and steadily push the tax base towards its full potential. We have no choice, given the facts of our national financial situation, and it also happens to be, fundamentally, a matter of fairness. No single taxpayer who is eligible should be left out of this obligation because every exemption denies Kenyans the right to benefit from national resources and is unfair to the loyal taxpayers who do the right thing.
“It is not an accident that revenue mobilization, though improving, remains far below its potential, that taxpayer apathy is rife, or that countless potential and actual taxpayers are terrified of the Kenya Revenue Authority, with several even traumatized by the sight of its officials. Revenue leakages, collusion between evaders and KRA officials to subvert revenue administration, a culture of raids, extortion, disruption of taxpayer operations and obstruction of business, are some dimensions of a wrong culture robbing our citizens of shared prosperity.
“We are determined to effect decisive change in order to swiftly reverse this unsatisfactory state of affairs. The practice of citizen harassment as a means of tax administration is unacceptable.
“In the past revenue collection registered dramatic growth. This was a result of an effective national mobilization strategy which appealed to our fundamental values and identity and employed citizen education, engagement and facilitation. Revenue then accounted for 18% of the GDP. In more recent times, the tax administration instrument has been weaponised to achieve objectives that are extraneous and inimical to enterprise continuity, investment sustainability, due process and the rule of law.
“The consequences are painful to contemplate. Our GDP has risen to KShs 12 trillion, yet KRA only raised about 14% of it in revenues last year. In the past, KRA was able to raise 18% of GDP. If we collect the same target today, then would have raised an extra KShs 400 billion. I expect KRA to raise 3 trillion by the end of the next financial year and to double the current collection in five years.
“As already indicated, we are committed to instituting comprehensive culture change at the KRA in order to make it more supportive of taxpayers. To achieve this, it will be necessary to radically reform KRA and make it a people-friendly, customer-centric organisation that facilitates taxpayer compliance as a core tax administration strategy. At the same time, it will be an explicit mandate of KRA to maximize tax collection while minimizing the compliance burden on the taxpayer.
“The time for extravagant rebranding exercises and diversionary and cosmetic changes is far behind us. It is now time for a radical shift in our KRA model, focusing on a robust service charter anchored on technology which explicitly commits to transforming customer relationships, simplify the taxpayer processes and optimising existing facilities to provide efficient services. This shift must demonstrate a strong commitment to the principle of impartial taxation where the tax burden reflects an ability to pay.
“KRA must therefore set out a strong and transparent integrity assurance mechanism, embedded in an equally vigorous corruption prevention framework in order to create stakeholder confidence in the transparency and accountability of its processes. The entire organization must evolve into a community united by a transformed corporate culture based on shared values, including the principles of public finance.
“KRA must also reflect equity by shifting from the over-taxing of trade and under-taxing of wealth, to enable the wealthy to bear an appropriate burden. As I have said before, our operating philosophy in matters of revenue mobilisation is going to be hierarchical. This means that we shall tax wealth, consumption, income and trade in that strict order.
“A safe, secure and conducive environment is necessary for enterprise growth and maturity. Tax administration must be consistent, coherent, impartial and rational. Businesses require simple and reliable tax systems and technologies. Our financial technology space has come of age, and talented Kenyans are now able to offer safe, secure, stable, and effective solutions at competitive rates.
“The National Treasury and KRA must continuously engage with stakeholders in order to collaboratively review tax policy and make it conducive to traders and micro-, small and medium-sized enterprises (MSME), to enter the tax bracket. To this end, the current draft National Tax Policy should incorporate our new economic strategy and spending plans.
“The KRA must take positive steps to make the business environment favourable to Kenyan traders. At the same time, it must seal revenue leakages, leverage trade facilitation technology to efficiently manage border points and promote the efficiency of cross-border trade.
“Our Plan aims at transforming the over 10 million Kenyans, currently struggling to put a meal on the table, into new taxpayers through interventions to rapidly increase incomes at the bottom of the economic pyramid. Our pledge to commit investments to the informal sector is intended to lift these millions from the bottom of the economic pyramid, into active wealth-creation, significantly broadening the tax base. A crucial pillar of this vision involves attracting high-quality investments in all sectors. Tax administration must not be a barrier to investor confidence or a factor of the high cost of doing business.
“This dramatic economic uplift will be situated in the MSME sector, which traditionally employs 90% of new entrants to the labour force. Our government will empower this sector through financial instruments to provide affordable and accessible financing to MSMEs. For its part, KRA must ensure that tax administration is fit-for-purpose, with a tax structure that enables MSMEs to contribute to national development.
“There exists tremendous potential for the KRA to play a significant role as the engine of national transformation. In order to rise to its full promise, it is time for KRA to finally catch up with the digital transformation that has swept through the country, positively transforming our social, economic and political landscape. A professional, people-friendly, customer-centric KRA should leverage technology and lighten the taxpaying burden through universal tax registration.
“The imperative of embracing technological solutions to KRA’s strategic issues is clear. There are only 7 million people with KRA pin numbers. At the same time, in the same economy, Safaricom’s MPESA has 30 million registered customers, transacting billions daily. The fact that this opportunity remains unclear to KRA demonstrates why radical changes are necessary. Every Kenyan with an ID should have a PIN number. Technology and a considerate, fair and professional mobilisation will do the job quite well. Safaricom, a telco, has registered more people than KRA, a powerful state organisation. It is very clear that the magic lies in technology and strategy, not power and resources.
“The agenda I have set out to recalibrate and re-orient our tax administrative framework signifies our appreciation of the contribution of our taxpayers, who continue to embrace their patriotic share of practical nation-building efforts. We must not deny any eligible Kenyan the opportunity to take part in this noble task of affirming freedom and entrenching our sovereignty. Universal tax registration is a historic endeavour to enlist all Kenyans in the patriotic effort of reinforcing our independence by enhancing self-reliance.
“We must pay attention to KRA because it plays an indispensable role in mobilising the resources required to enhance the well-being of Kenyans and finance the necessary measures for growing the national cake. How we do our tax administration can determine whether KRA is the fulcrum in a virtuous or vicious cycle in our public finance management system.
“The measures I have set out, therefore, demonstrate our government’s full appreciation of the KRA as a guarantor of national development. We are clear in our understanding that it must become even more effective in this mandate. I pledge my total support for KRA’s role and evolution towards optimal tax administration for a historic, transformational era.
“I am determined to ensure that our tax system is responsive to the needs of the new era in the Kenyan tax administration. I commit to becoming your ambassador by leading Kenyans in paying taxes.