Businesses Switch To Internet ETR Machines

By Brian Rotich

Numerous Value Added Tax (VAT) businesses have complied with the directive by the Kenya Revenue Authority (KRA) to fit mandatory internet-enabled tax registers (ETRs) by 1st December 2022, boosting plans by the government to maximize revenue collection.

Sources said that about 68 percent of VAT-registered large and medium traders had complied as of October 12, 2022, ahead of the deadline – meaning that the transactions of most VAT-paying traders are now directly monitored by the tax man to curb tax evasion and boost revenue collections.

The new automated registers will help KRA receive real-time data on traders’ daily sales and invoice data; an upgrade from the current manual tax registers that store sales data for scrutiny by the KRA after 30 days.

Manufacturers and traders who fail to upgrade to ETRs at their business premises risk a fine of Sh1 million or a jail term of three years.

Businesses with an annual turnover of at least Sh5 million are under the law required to have ETRs as the KRA seeks to seal revenue leakages from the big taxpayers. But even as KRA pushed for compliance, some traders are still reporting teething software problems with the ETRs machines.

The regulations are designed to heighten KRA’s visibility of transactions for purposes of sealing revenue leakages that result in underperformance in tax revenue collection.

According to data from the National Treasury, Kenya foregoes an average of Sh383.9 billion worth of would-be tax revenue every year, with VAT accounting for the lion’s share of this revenue leakage at Sh 314.7 billion or just about 82 percent of the total amount.