- KRA moves to block businesses using VAT registration to facilitate tax evasion.
- Genuine traders to receive faster registration as suspicious applications face closer scrutiny.
- Tax evaders risk fines amounting to twice the tax avoided.
Businesses that register for Value Added Tax (VAT) only to help others slash their bills are now in the sights of the Kenya Revenue Authority (KRA). The taxman has launched a fresh crackdown on such fraudulent arrangements.
According to KRA, some firms apply for VAT registration with no intention of meeting their own obligations. Instead, they use it to run schemes that deliberately shrink the VAT owed by other businesses.
Commissioner for Micro and Small Taxpayers George Obell outlined the response at a stakeholder engagement in Machakos. Applications will face closer scrutiny, he said, so that suspicious activity can be flagged early.
Genuine traders should not feel the pinch, however. Obell said KRA is also reworking its registration process after taxpayers complained of long delays. Firms whose operations can be verified will move through faster, while those that raise doubts will go through extra checks and take longer.
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In his words, the authority wants established businesses to register and comply with less hassle. Applicants it is unsure about will wait longer.
Obell added that the goal is to stop registration from being abused as a tool for fraudulent transactions. Such abuse, he said, helps other taxpayers lower their liabilities illegally.
The penalty for getting caught is steep. Under the Tax Procedures Act, a business found guilty of tax evasion can be fined twice the amount of tax it avoided.
Education also featured in the discussions. KRA Chairperson Ndiritu Muriithi said many businesses fall short simply because they do not know that paying tax is a legal duty. Everyone must understand their role, he said, and taxpayer education remains the most important step towards compliance.
The crackdown forms part of a wider push to seal loopholes that businesses exploit to dodge tax. It also supports efforts to raise government revenue. In recent months, KRA has stepped up enforcement and revisited its administrative procedures, making it easier for compliant taxpayers to meet their obligations.
By Benedict Aoya
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