TAXATION
Declare All Your
Taxes
By CPA Nicholas Gachara
W
e are a country where money is
the main motivator of our hard
work. Every coin in the pocket
adds value to the standard of living. This
increases the urge of continually moving
away from a single source of income
to multiple sources of income or as
we call it hustles. This is because of the
ever increasing cost of living. Cherished
weekends, which were mostly for spending
time with family and friends, no longer
exist.
Typically, eight to five job is not enough
and we spend the other five to nine on
some other income generating activities.
For instance, some marketers would be
engaged in an eight to five white collar job
then rush off to consult for a client on how
to maximize sales from five to nine. This is
often successful though tiring.
The joy comes when banking those checks.
Nothing is as good as seeing the fruit of
your labour especially if it’s from your
extra effort. As you laugh all the way to
the bank, you hardly remember that there
is a shareholder in those checks: The
Government. How will they know?
If you are asked to pay taxes on those
checks you would quickly retort that they
already ‘steal’ from your employment
income and therefore should not deduct
any coin from your part time hustle. You
may add that they will never catch you
and that you have done that many times.
We intentionally evade from paying thus
assume that the government has no way
to catch us as this has been a habit and an
assumed culture. The Kenya Revenue Authority (KRA)
has at its disposal various mechanisms to
collect tax revenue which are increasingly
getting more effective. One way is the
system of withholding tax which varies
from 3% to 20% depending on what
service you offer and your residential
status. Withholding tax also applies to
Value Added Tax (VAT) which is done
by appointed agents such as all parastatals
and some private companies. This rate
currently is 2% of the cost.
You are in for a rude shock!
First understand that taxes should be seen
as a cost of doing business and therefore
must be declared and paid. As the saying
goes the certain things in life are death
and taxes. The public services that you
enjoy such as roads, street lighting and
security among others are not free. You
may retort that the quality is poor to some
extent and non-existent in some cases but
that does not exonerate you from paying
taxes.
Taxes should be seen as a cost of doing busi-
ness and therefore must be declared and
paid. As the saying goes the certain things in
life are death and taxes. The public services
that you enjoy such as roads, street light-
ing and security are not free. You may retort
that the quality is poor to some extent and
non-existent in some cases but that doesn’t
exonerate you from paying taxes.
58 MAL34/20 ISSUE
Your customer is required to withhold
from your invoice and remit it to the
Kenya Revenue Authority (KRA)
directly. All companies and registered
business by default have been appointed
as withholding tax agent of listed services
in the finance Act. KRA would therefore
expect you to submit the balance of the
tax due by the required dates lest you
incur hefty penalties and interest on the
outstanding amounts. For instance, if your
customer withholds and submits 5% as
withholding tax then KRA would require
the 25% balance to be submitted in form
of a return by the due date which is by the
fourth month after your financial year end.
KRA have also hired competent staff
who are engaged in various intelligence
analysis to identify tax evaders. Recently
they sought a budget to hire one thousand
more staff to assist in tax collection. This
was approved and the staff recruitment
is ongoing. They seek to make linkages
between individuals and firms dealing
with each other but not paying their fair
share of taxes.