Former Kenya Revenue Authority (KRA) Commissioner-General James Githii-Mburu. PHOTO/FILE
By Dr VINCENT OKOTH ONGORE
newshub@eyewitness.africa
There is disquiet at the taxman’s tower. Many Kenyans have noticed that things are not fine in tax administration, but for lack of technical know-how, they can’t quite pinpoint what exactly is wrong.
Kenya Revenue Authority (KRA) had consistently done very well for over two decades, then from the blues, things started going south. That is the KES 2.6 trillion question.
Were I to be asked to advise the government on tax administration, my first piece of advice from the tip of my finger would be: please stop rocking the Kenya Revenue Authority boat without a viable strategy; it has a demoralizing and destabilizing effect on domestic revenue mobilization.
It is delicate and tedious to put together the necessary nuts and bolts to ensure that a Tax Administration operates effectively and efficiently, but it takes only one bad decision.to destabilize it. The current problem at KRA appears to have resulted from one bad decision that sent wrong signals to the entire tax administration system.
If you want to make changes at the revenue agency, you must observe two things. First, identify what you want to change for strategic reasons, move in and fix it quickly, and let the organization absorb the shock and settle down.
Don’t keep revenue officers in suspense for an inordinately long period, as doing so gives them reason to worry about their future in the organization. To cushion themselves against uncertainties, they will share the revenue with the exchequer. That is not a remote possibility.
Second, ensure sustainability of key technical competencies. Take care not to remove technical officers in large numbers at a go. It takes about 7 years to create a critical pool of dependable technical skills in tax administration. The first 2 years are spent at the training school and desk training, and the next 5 years on navigating the ropes of tax administration.
In KRA, a large number of senior staff do not have technical skills in tax administration. They are mere joyriders who can be replaced without much effect of revenue collection. In fact, best practice favors outsourcing of most of the non-core responsibilities in tax administration.
The technical staff comprise just about 20 percent of the entire human resource at KRA. So, it is instructive that any lay-offs be done in a manner that doesn’t deplete the critical mass of technical skills at the revenue agency.
I think the current Board-led restructuring has been more whimsical than structured. In their zeal to rid KRA of undesirable individuals, the Board has not paid attention to the possible ramifications of their decisions.
The suspense at KRA is simply unbearable for most of the revenue officers. They are waiting to see what finally becomes of the restructuring, which has all the characteristics of an ill-advised, hapharzard process. The effects are clear to everyone who cares to see them.
Most outsiders think that anyone who goes by the name Revenue Officer is trained on revenue administration. The reality, however, is that a lot of officers in the organization were deployed before they received any meaningful training on revenue administration.
These officers depend on a daily basis on their trained counterparts for technical and policy decisions. Similarly, a lot of tax accountants and lawyers in private practice believe that they understand tax administration processes. That’s is not entirely true. They are tax advisors. What goes on at KRA is tax administration.
Any honest person will accept that tax accounting/advisory and tax administration are very different ball games. Whereas tax advisory deals with determination of tax liability of a taxpayer, tax administration is a process of designing strategies based on the country’s fiscal policy and tax law to mobilize domestic resources to underwrite development and recurrent expenditures.
Times Towers, the Kenya Revenue Authority (KRA) headquarters. PHOTO/KRA
Many people who have been plucked from the private sector and thrust to the deep end of tax administration have struggled to swim ashore. Granted, one or two have done a sterling job, but it had more to do with their ability to put together a winning team than technical competencies.
One may wonder why the KRA Commissioner General (CG), as Chief Executive Officer, requires technical skills. The KRA Act Cap 49 of the Laws of Kenya defines the Commissioner as the Commissioner General. That means that the CG makes technical decisions on behalf of the organization.
At inception, the KRA Act envisaged that revenue commissioners would be the technical officers while the CG would give the organization the strategic direction. The Act was amended in order to give the CG a hell of sweeping powers while holding commissioners accountable for wrong decisions made in their departments! This kind of arrangement creates a czar at the helm of KRA. A good number of recent CGs have made commissioners’ lives a hell on earth.
It appears to me that the current Board of Directors of KRA is led by a gentleman who has difficulty distinguishing chairman of the board and chairman of KRA. The former leads the board in making strategic decisions which are then implemented by the CG and his team, while the latter is an executive chairman who runs both the operations and the governance processes of KRA.
In corporate governance, there’s a concept known as chairman/CEO duality, which refers to a situation where the responsibilities of chairman and CEO are vested in one office, and discharged by the same person. Such an arrangement creates a position of Executive Chairman.
The KRA provides for chairman of the board of directors, and not Executive Chairman. Typically, it is a non-executive chairman whose interface with operations is the CEO. In the past several weeks, however, Kenyans have seen circulars signed by the current chairman of the KRA board of directors purporting to make a raft of technical and policy decisions on behalf of KRA.
Such decisions are a clear manifestation of attempts to usurp the powers of the CG and the Minister without an overt legal anchor. Such unilateral decisions have caused panic among taxpayers and revenue officers alike.
Everyone appears to be waiting, in vain, for guidance from the office of the CG. Meanwhile, the revenue officers cannot make technical decisions on matters that were the subjects of the Chairman’s circular.
The implications are that a lot of revenue is locked up awaiting the CG’s nod while taxpayers are preparing lawsuits against KRA for illegal or delayed decisions. Is it any wonder that KRA cannot meet its revenue targets?
Things are not looking very good at the taxman’s office. Some courageous Kenyan needs to tell the President that crack the whip and cause the Chairman to shape up. The chairman is largely responsible for the procrastination at KRA, a situation that is undermining revenue collection.
Apparently, the Chairman is so powerful that no one within the organization can dare challenge his sub-optimal decisions. So, we have a situation where the government is in dire need of increasing amounts of exchequer revenues, but their trusted man at the helm is literally clogging revenue administration processes!
It is a problem of entrusting gigantic responsibilities to greenhorns. Kenya has all the domestic revenues it requires to run her internal affairs. All that needs to be done is streamline revenue administration processes, embrace taxpayers and motivate tax collectors.
If we get all the three right, we will be home and dry as far as tax administration is concerned. Tax administration is not rocket science. But, the government must get it right at the first instance. Mwai Kibaki was precise in the first instance. Uhuru Kenyatta got it right after a rather prolonged learning curve. William Ruto has gotten it wrong in the first instance. It is not too late, though.
The ball is on the President’s court.
Dr VINCENT OKOTH ONGORE is a tax administrator and consultant.
