1. 1 www.KRA.go.ke20/11/2015 1 www.KRA.go.ke20/11/2015 REMARKS AT MEDIA BRIEFING J. K. Njiraini, MBS Commissioner General Kenya Revenue Authority 22 ND SEPTEMBER 2015

2. 2 www.KRA.go.ke20/11/2015 2 www.KRA.go.ke20/11/2015 1. FOCUS Core Tax Reform Drivers Briefing on Rental Income Taxation Reform Briefing on Withholding VAT Scope Expansion

3. 3 www.KRA.go.ke20/11/2015 3 www.KRA.go.ke20/11/2015 2. CORE REFORM DRIVERS Simplicity – Make legislative/administrative processes simpler – reduce legal and administrative complexities. Convenience – Offer convenient compliance mechanisms – primarily focus on automation via electronic and mobile platforms Lower Compliance and Administration Costs – implement processes that make tax collection cheaper for both Taxpayer and KRA.

4. 4 www.KRA.go.ke20/11/2015 4 www.KRA.go.ke20/11/2015 2. Core Reform Drivers (Contd.) Expand Taxpayer and Tax Base – Implement mechanisms that facilitate:  Easy recruitment of eligible taxpayers  Detection/prevention of tax fraud Both objectives can be addressed effectively by leveraging Third Party Data

5. 5 www.KRA.go.ke20/11/2015 5 www.KRA.go.ke20/11/2015 3. RENTAL INCOME Core Challenges – enhance compliance levels - increase taxpayer numbers - improve declaration accuracy Key Challenges  Tax payers found previous regime complex and difficult to comply with generation of tax disputes – e.g. deductible expenses Integrity challenges – scope for compromise  Large proportion of property owners in default and hence reluctant to come forward.

6. 6 www.KRA.go.ke20/11/2015 6 www.KRA.go.ke20/11/2015 3. Rental Income (cntd) Approach Taken  Introduce simplified taxation regime pegged on gross rental income − Final tax @ 10% of gross rent − Applicable for income thresholds below Sh.10 million p.a. − KRA to focus on recruitment and mobilisation.  Introduce amnesty for back taxes − Create incentive to attract defaulters.  Marketing Campaign commenced − Media campaign − Outreach clinics − Recruitment teams (agents/part timers)

7. 7 www.KRA.go.ke20/11/2015 7 www.KRA.go.ke20/11/2015 4. WITHHOLDING VAT Previous WHVAT regime discontinued in 2010  VAT refunds backlog – excessive withholding.  Weak process management and potential abuse – fraudulent claims New regime re-introduced in June 2014.  Capture data on persons trading with Government  Partial withholding (6%) to avoid refund claims  Focus on information capture not revenue mobilisation  Withholding process automated through iTax

8. 8 www.KRA.go.ke20/11/2015 8 www.KRA.go.ke20/11/2015 4. Withholding VAT (Cntd) Scope of expanded in June 2015  Other taxpayers @ KRA discretion.  Roll out done in respect of 43 Taxpayers.  Scope expansion to cover LTO & MTO taxpayers within 60 days – (approximately 3200 Taxpayers).  Significant data capture and resultant benefits − Taxpayer recruitment − Detect income mis-declaration − Implement Strategy for Data Utilisation (short & long term)

9. 9 www.KRA.go.ke20/11/2015 9 www.KRA.go.ke20/11/2015 5. CONCLUSIONS Continuously Pursue Innovations  Leverage Technology  Process Reforms Expand Partnerships with Key Players  Counties – Exploit Synergies.  Professional & Business Associations  International Partners – best practices, knowledge sharing.

10. 10 www.KRA.go.ke20/11/2015 10 www.KRA.go.ke20/11/2015 5. Conclusions (Cntd) Sustain Reforms for Enhanced Service Delivery  6 th Corporate Plan Theme & Vision. ‘ Building Trust through Facilitation so as to Foster Compliance with Tax and Customs Legislation ’  Organisational Process Reforms – Audit Governance, Tax Dispute Resolution  Pursue “Total Automation”  Accelerate Staff Culture Change