Kenyan businesses fear the Kenya Revenue Authority (KRA) so much that it is very uncommon to come across business owners who feel comfortable with KRA encounters. Some even liken such visits to swallowing hot porridge which, we can all agree, would be quite an unforgettable and unbearable experience. This fear is so ingrained in Kenyan businesses that even tax professionals themselves dread these encounters despite being well-versed in tax matters. In fact, we would not be stretching the truth if we claimed that other than KRA officials, most businesspeople have a reason to avoid the KRA. So, why do Kenyan businesses fear KRA and what can you do about it?

Why Kenyan Businesses Fear KRA.

Fear can arise for many reasons. Sometimes, it results from the fear of the unknown and in other cases, it stems from our own experiences or those of others. When it comes to why Kenyan businesses fear KRA, you find that the reasons vary. Some of these are unfounded, others are based on rumors about KRA officials, and others are based on real encounters that have had terrible encounters. Unfortunately, these fears only serve to distance businesspeople from being tax compliant or even fighting for their rights in the event of a tax assessment or a demand notice. And this works to the advantage of KRA, including some of its personnel who revel in this fear as it allows them to get away with bending the law.

But before we can get to what you can do about KRA encounters, we have to understand why so many Kenyan businesses fear KRA. They are as follows:

Harassment.

If you have been operating a business in Kenya for a while now, then you are probably unsurprised by this point. For decades, KRA officials have been known to harass businesspeople, so much so that if you have not encountered such harassment, then you have heard about such encounters, be they rumors or verified stories. Some KRA officials even ask for bribes from businesspeople.

As a result, many businesspeople take measures to avoid ever meeting with the KRA. For instance, many businesspeople hire accountants to work on their books of accounts and they task these accountants with everything from filing their tax returns to conducting audits. In this way, they barely ever get to interact with KRA directly and will only visit the KRA offices when the need arises.

The Risk of Criminal Charges.

The KRA does have a legal right to bring up criminal charges against taxpayers who commit tax offences. And going by KRA news reports, it becomes clear that this authority does enjoy bringing up criminal charges against taxpayers. They range in nature, including:

Fraud.

Tax evasion.

Obstruction.

Falsification of documents, etc.

To their credit, some of the charges are often valid. But even in such cases, you find that KRA officials often handle the matters quite aggressively, thus having a negative impact on the businesses.

In other cases, the crimes brought up against the taxpayers have no legal basis or they are not crimes per se, depending on the circumstances surrounding these matters. Even so, you find that some KRA officials will still bring up criminal charges against taxpayers, with some going to the extent of threatening the taxpayers with severe penalties if they fail to comply with their demands.

Lack of Legal Knowledge.

Atop the reasons we have covered, a key reason many Kenyan businesses fear KRA is because they do not know their rights when it comes to tax matters. And this comes about in three ways: dealing with KRA officials, fulfilling their tax obligations, and knowing what documentation is necessary.

Understanding Documentation.

Business owners, in many cases, do not know what KRA will require of them when they visit. As such, even if they may keep proper records, they may think that their records are insufficient to prove that they are being compliant.

Misinformation and Disinformation about Taxes in Kenya.

While there are real concerns regarding the behavior of some KRA officials who take advantage of the fears that businesspeople have, we can agree that much of the fear of KRA comes from the lack of information. Not only are businesspeople exposed to misinformation but also disinformation regarding what KRA can and cannot do.

These half-truths and outright lies can stem from agents, other businesspeople, and other people in Kenya, some of whom may even have good intentions. As such, even when businesspeople do want to be compliant, they find themselves bombarded with a lot of conflicting information that makes it harder for them to be on the right track.

Are You One of the Kenyan Businesses that Fear KRA? Do This.

The best way to deal with fear is to face it head-on. First, research what tax obligations apply to you based on your business type and the nature of services you provide. Secondly, look into whether your books of accounts match the taxes you have been paying to the KRA. Thirdly, ensure that you file your tax returns based on your tax obligations as these vary per business type. And fourth, make sure that you maintain accurate records that paint the financial picture of your business. Finally, read up on your rights as a taxpayer. With these five steps, even if KRA officials come to your premises, you will know your rights and since you will be compliant, you will have no problem addressing them without fear.

If you need legal help dealing with KRA, you can always arrange a consultation with one of our legal experts using the form below.