How KRA Is Using Crowd Intelligence To Curb Tax Evasion

By Dr Terra Saidimu

The economic stability of a country is heavily reliant on resources mobilised through taxation. Tax revenues keep the economic wheel on the move.

However, tax crimes and related malpractices dent tax collection efforts thereby occasioning substantial loss of government revenue. Tax malpractices are a global and regional pain.

A report by The Africa Initiative dubbed “Tax Transparency in Africa 2020”, for instance, estimates that Africa suffers revenue loss of around $40 to $80 billion every year to tax evasion. This amount can comfortably fund key projects.

Such statistics are the reason authorities are working round the clock to clip tentacles of tax malpractices. The approach adopted by the Kenya Revenue Authority (KRA) is multifaceted and ranges from automation of processes to leverage on intelligence gathering and management. Although automation of processes is key in reducing human intervention, a major breeding ground for malpractices, intelligence gathering and management is a major boost.

A major setback to this process is unwillingness by various stakeholders such as the public to volunteer information to relevant authorities. The failure by members of the public to report tax evasion, corruption and other malpractices has been a concern. According to a survey conducted in 2019 and published in 2020 by Transparency International Kenya, majority of Kenyans do not report corruption cases.

The survey titled “Kenya Bribery Index 2019”, reports that 87 percent of respondents sampled in 2019 never reported corruption cases. However, compared to a similar survey conducted in 2017 where 94 per cent of the respondents noted that they never reported corruption cases to authorities, the 2019 survey points to a slight improvement. For this reason, KRA has enhanced its intelligence gathering and management function to allow for 100 percent anonymous reporting of the said malpractices. This has been actualised through establishment of an anonymous online reporting channel for such cases called the iWhistle (www.kra.go.ke).

The channel exists under the whistleblower framework to encourage members of the public to volunteer information on malpractices. In addition to reporting tax evasion, which sabotages tax administration, the general public can report the following to KRA through the platform: bribery, fraud, conflict of interest, abuse of office, concealment, diversion of cargo and any other practice that may sabotage KRA’s revenue collection efforts.

The first step on board iWhistle entails account setup where the system generates unique anonymous login credentials for the user. After successfully setting up the account, whistle-blowers can then report aforementioned cases to KRA for action. After verification of the information received, KRA sends updates of the proceedings to the whistleblowers. An important aspect to note about the iWhistle is that there is no one point where the whistleblowers are required to identify themselves.

The KRA whistleblower framework is complemented by a reward framework where the Authority appreciates whistle-blowers who volunteer information that results in recovery of tax revenues. The reward framework, which is stipulated in the KRA Act cap 469 chapter 5A, provides for a reward of whichever is lower between five percent of the recovered tax or Ksh2 million. Policy changes are however underway for an upward review.

For whistleblowers seeking a reward for information shared, a slightly different framework is followed to obtain personal information for purposes of processing the reward. Nonetheless, KRA maintains their identification details in confidence.

Just like security which starts with an individual, so does ending all forms of tax malpractices. In the true spirit of patriotism therefore, members of the public should report tax malpractices.

Last year, 75 employees of the Kenya Revenue Authority (KRA) were interdicted and over 200 arrested for allegedly abetting tax evasion and engaging in related fraudulent deals.

The employees, are accused of facilitating irregular cargo clearance, fraudulent amendment of tax returns so as to help taxpayers evade taxes and irregular issuance of tax compliance certificates.

KRA had launched a crackdown to eliminate employees colluding with tax cheats to frustrate achievement of revenue targets leading to firing of managers. The agency has been enforcing more strict rules to increase efficiency besides shedding off inefficient managers who have not been meeting tax collection targets.

Top managers who failed to pass lifestyle audit were fired. A probe conducted by DCI detectives linked the fired to illegal dealings that saw a number of wealthy individuals and companies evade paying tax.

Following tip offs, last year in October, the offices of tycoon Mohammed Jaffer in Mombasa were raided over Ksh200 million tax evasion probe.

Jaffer who owns African Gas and Oil Company Mombasa is said to have been underpaying the corporate tax and also reducing his company’s tax liability by under-declaring and undervaluing imports.

Among the documents seized during the raid for examination by KRA were bank statements, financial reports, import declarations, stock records and delivery and sales records.

-Dr Saidimu is the Commissioner for Intelligence and Strategic Operations at KRA.