STATEMENT ON ELECTRONIC TAX REGISTERS
Kenya Revenue Authority wishes to respond to issues raised by Joe Donde in relation to the Electronic Tax Registers in a letter published in the Sunday Nation dated October 2 nd 2005 , as follows:
- Although the VAT Act requires that a person who meets the three million VAT threshhold to register for VAT, the Commissioner is empowered to require any person who supplies taxable goods or services to use an ETR. The threshhold is usually self determined and the ETR will subject the choice to necessary objective evaluation. Currently, there are traders who are required by Law to register for VAT but they have not and have been using all manner of tricks to stay out of the tax net. The ETRs will create a level playing field and ensure that eligible taxpayers pay taxes as required by Law.
- So far KRA has approved 36 fiscal devices represented by 13 suppliers and continues to vet more through strict selection criteria as per Legal Notice Number 110. KRA wishes to also inform taxpayers and the general public that most of the countries that have implemented ETRs started off with four suppliers. It is expected that as more devices are approved taxpayers will have a wider choice.
- Currently, the list price of ETRs ranges from KShs 35,000 to 150,000 depending on the make, manufacturer and country of origin and suppliers margins over which KRA has no control. KRA has no restrictions on the number of suppliers so long as they meet the laid down specifications and would encourage companies with supply capacity to apply for consideration. In any case, due to the many concerns raised on cost, KRA has forwarded the matter to the Price and Monopolies Commission at the Treasury for evaluation. The risk of unscrupulous taxpayers inflating the prices of ETRs and in the process fleecing the Government money in term’s of refunds, will therefore be addressed.
- Traders are entitled to claim from KRA, the cost of ETR. Such a claim would have fiscal receipts from the supplier, together with the cash order. No supplier will agree to issue a receipt for a higher price because the information will be captured in his register and KRA will require him to pay taxes as per sales made.
- ETRs may be easily available outside Kenya but to our knowledge manufacturers rarely deal with individual traders. The devices require back up, maintenance, guarantees and training of personnel that individual traders will not be able to provide. In any case, the devices are being made according to specifications given by KRA.
- The fiscal memory of ETRs is five to eight years and is renewable but the life span of the device is more than two decades. Traders will not need to buy a new register, but to renew its memory as part of their operational cost.
- KRA currently has 50,000 VAT registered traders but with the introduction of ETRs the figure is expected to reach 250,000 thus bringing into the tax net people hitherto noncompliant. The Authority also expects to recruit an additional 20,000 traders annually. As the ETR system takes effect, traders will find it difficult to transact business with those without fiscal receipts.
In conclusion KRA’s intention, as mentioned earlier is to create a level playing field for all traders and to improve revenue collection for the benefit of all Kenyans. In particular KRA expects to collect an additional ten billion annually for the Government once the ETR system is fully implemented.
COMMISSIONER OF DOMESTIC TAXES