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IFMIS, ITAX, CBK Systems Integrated to Streamline Payment of Taxes at National and County Levels

BY David Indeje · December 23, 2016 08:12 am

Suppliers doing business with the National and County governments have until January 31 to update their records after the government integrated all its payment systems.

To drive greater compliance and improve effectiveness and efficiency in streamlining payment of taxes by suppliers to the National and County government entities, the Integrated Financial Management Information System (IFMIS), iTax system of Kenya Revenue Authority and Central Bank of Kenya (CBK) systems have been integrated.

According to a statement co-signed by the National Treasury Principal Secretary Kamau Thugge and KRA’s Commissioner General John Njiraini, integration of the three systems will allow the government to track supplies and payments across the national and county governments.

“The main objective of the integration is to facilitate timely payment to suppliers, generation of withholding tax certificates on amounts withheld by withholding agents and faster processing of Tax Compliance Certificates,” the statement said.

“This process will help suppliers to ‘self-clean’ their details in IFMIS. Suppliers who will not have updated their details by the due date may have difficulties in submitting their bids through the e-procurement module and in receiving payments through IFMIS,” read the statement.

The announcement seems to be a response to the Coalition for Reforms and Democracy (CORD) intent to sponsor a bill to ensure suppliers are paid on time as a way of curbing graft.

In November, the proposed Prompt Payment Bill, 2016, sponsored by CORD and the Orange Democratic Movement (ODM) proposes that all invoices for the supply of goods and services must be settled within 30 days of submission to the government; that any questions about an invoice must be raised within the said 30 days and communicated to the supplier in writing before the end of the said period; all such queries must be resolved within 10 days from the date they are raised and communicated to the supplier.

The Bill also proposes that every public authority that is a procuring entity establishes an internal appeals system to review all decisions made not to settle an invoice.

It also proposes establishment of a Public Invoices Settlement Tribunal to hear appeals from any decisions made by internal appeals mechanisms of every public authority not to pay an invoice.

Central Bank of Kenya the same month distanced itself from the scandal that has embroiled the National Youth Service as regards to the IFMIS portal.

The regulator emphasised that the Integrated Financial Management Information System(IFMIS) – an automated system that enhances efficiency in planning budgeting, procurement, expenditure management and reporting in the National and County Governments in Kenya – is owned and operated by the Treasury, not CBK.

KRA is on an ambitious plan aimed at raising Sh1.38 trillion target in collection for this financial year ending next June.  Currently, it is ahead of its domestic borrowing for this fiscal year having borrowed Kshs 155.8 billion for the current fiscal year against a target of Kshs 110.4 billion.

However, the government is in the process of revising its domestic borrowing target upwards to Kshs 294.6 billion, which will take the pro-rated borrowing target to Kshs 141.6 billion according to Cytonn Investments.

With the integration, there is a likelihood of KRA maximising the collection of withholding value added tax and income tax from government’s development budget standing at KSh809 billion this financial year.  

The integration is part of KRA’s plan to access taxpayer’s data through third parties, following the amendment to the KRA Act in the Finance bill 2016 now before the National Assembly.

The Finance Act, 2016 was assented to by the President on 13th September 2016 after being passed by the Committee of the Whole House with some amendments made to the Finance Bill, 2016.

A number of changes not included in the Bill have now been introduced in the Act. Most of the amendments introduced by the Act came into force as of 9th June 2016 with a few exceptions which came into force on 1st July 2016. The remaining parts will commence on 1st January 2017.

Some of the changes that will be effective from 1st January 2017:

Income Tax Amendments: The PAYE brackets have been expanded by 10% and the relief also increased by 10%. Annual Relief has been amended to KES 15,360.

Expenses incurred in sponsoring sports by a company will now be tax allowed. However, a company interested in sports sponsorship should obtain prior approval from the Cabinet Secretary responsible for sports.

Withholding tax on winnings from betting and gaming has now been abolished. The Lotteries, Betting and Gaming companies will no account for withholding tax on paid out winnings.

Value Added Tax updates: VAT on service charge has been removed, provided that:

All the service charge is distributed directly to the employees in accordance with an agreement between employer and employees; The service charge does not exceed 10% of the price of the service.

Changes in the Tax Procedures Act: Refund of overpaid tax, a taxpayer can apply for a refund of overpaid tax within a period of 5 years from the date which the tax was paid. Any amount not refunded within 2 years will accrue interest rate of 1% per month.

Waiver of interest, taxpayers will be able to apply waiver of interests on unpaid taxes or additional assessment. Remission of interest is only applicable where:  There is uncertainty as to any question of low or fact; The reduction is in consideration of hardship or equity and It will be impossible or expensive to recover the tax

Betting, Lotteries and Gaming Act: taxes will be applicable to the various revenue streams and are payable to KRA by the 20th of the following month:  Betting tax of 7.5% on the gaming revenue, Lottery tax at 5% on the lottery turnover, Gaming tax at 12% on gaming revenue and Prize competition tax at 15% on the cost of entry to a competition which is premium rated.

Related: KCB Deactivation From URA Angers Kenyans as Answers are Demanded

 

David Indeje is a writer and editor, with interests on how technology is changing journalism, government, Health, and Gender Development stories are his passion. Follow on Twitter @David_Indeje David can be reached on: (020) 528 0222 / Email: info@sokodirectory.com

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