An Evaluation of Taxpayer Relations with the Tax Authorities in Kenya

Paper author: 
Oxfam in Kenya
Paper publication date: 
Monday, October 5, 2020

Tax revenue is essential in providing the resources needed to finance sustainable development. The success of any state in collecting taxes while maintaining low cost of compliance is determined to a large extent by the effectiveness of the strategy employed in tax collection. An effective tax collection strategy promotes voluntary compliance due to the high costs associated with enforced compliance.

Voluntary compliance necessitates a certain level of trust in the relationship between the tax authority and the taxpayers. Recognizing the key role of trust in this relationship, the KRA began its organization transformation journey in 2015 to enhance compliance by building trust through facilitation. The new approach by the KRA signalled a shift from traditional use of coercive power, which often results to conflict and expensive litigation to focusing on building trustful relationships, first with staff internally, and with the citizens to ensure compliance.

Despite the KRA effort, the relationship with taxpayers remains laced with mistrust with the KRA perceiving taxpayers (both large and SMEs) as being driven by financial gains thus actively engaging in tax avoidance and evasion. This perception by the KRA is towards all taxpayers and informs the KRA’s insistence on tax audits especially large taxpayers. Taxpayers on their part perceive the tax audits as inefficient and the tax dispute resolution process available as lacking in independence. the KRA

On the positive side, both taxpayers and revenue authority acknowledge
the technical competence of the other which sets a good foundation for collaboration in design of sound tax policies and when resolving disputes.
In addition, there is willingness on both parties to foster a good relationship. the KRA has taken a lead in this through improved customer care, more stakeholder engagement and education, adoption of technology to ease compliance and increased capacity in the Alternative Dispute Resolution (ADR) department to ensure prompt resolution of disputes.