The Kenya Revenue Authority (KRA) has tightened its Value Added Tax (VAT) registration process to curb rising cases of tax fraud involving fictitious traders, even as it intensifies taxpayer education across the country.
Speaking in Machakos during a taxpayer engagement forum, the Commissioner for Micro and Small Taxpayers George Obell said KRA had noted abuse of VAT obligations, where some entities seek registration not to comply, but to help other businesses fraudulently reduce their VAT liability through what is commonly referred to as “missing trader” schemes.
“Previously we used to give VAT obligation automatically. Unfortunately, we found that there are cases of people who are getting VAT obligations not to pay VAT, but to come up with schemes to help other taxpayers to reduce their VAT liability,” Obell said.
He said KRA had introduced enhanced vetting that requires applicants to provide specific records and documents to establish the legitimacy of their businesses.
However, following complaints from taxpayers over delays in the process, the Authority is now easing registration for established and verifiable businesses, while subjecting suspicious applications to more rigorous checks.
“We have got this feedback from the taxpayers that it takes a long time, and so we have looked at that process to try and make it fairly easier, especially for established businesses. The ones that will take a little bit more time is on the businesses that we are not sure about,” Obell explained.
The commissioner said KRA is shifting from enforcement to cooperative compliance, supported by technology and education to help taxpayers understand and meet their obligations.
He said the Authority will scale up taxpayer education countrywide, noting that many Kenyans fail to comply due to lack of awareness.
He said KRA had also simplified dispute resolution, decentralizing services that previously forced taxpayers in the region to travel to Embu.
A local committee will now handle such matters in Machakos to ease access to services.
On illicit trade, Obell said multi-agency teams involving KRA, NACADA and other enforcement agencies have embarked on a re-licensing exercise targeting manufacturers and traders in excisable goods, particularly cigarettes and alcoholic drinks.
“There were a lot of illicit products, especially in cigarette and alcohol. We started a journey of re-licensing all the players. We look at what you have and how you have organised yourself, and if you pass the requirements, you are given back your licence,” he said, adding that the exercise has helped weed out illegal operators and gather intelligence on specific cases.
The Commissioner further urged taxpayers to take advantage of the ongoing tax amnesty, which lapses on December 31, 2026, to regularize their tax affairs.
Obell added that KRA has invested in simplified systems to lower the cost of compliance, especially for small taxpayers, including mobile-based tools and WhatsApp-enabled filing services.
“We have given them very many tools, even tools that are available on their mobile systems, even on WhatsApp, so that they can be able to comply and pay their taxes,” he said.
He said increased engagement and use of technology has led to improved voluntary compliance, with more taxpayers paying taxes without enforcement.
“The critical thing that we see is as we continue to work closely with taxpayers and as we continue to engage them, we see the voluntary compliance increasing. People are coming forward by themselves and paying taxes. So we are using less of enforcement and more of cooperative compliance,” Obell noted.
On PAYE, Obell said compliance remains high since the obligation lies with employers, but VAT remains the major area of concern due to past automatic registration that was exploited.
Taxpayers at the forum called for deeper sensitisation at the grassroots, saying most want to comply, but lack sufficient knowledge on tax obligations.
by Anne Kangero/ William Peshut
