By Patrick Kisembo
THE Pay As You Earn (PAYE) tax year-end is looming in most East African countries, and governments are clamping down on non-compliance among businesses and individual taxpayers as they strive to raise more funding for public spending.
That means businesses must ensure that their payrolls are fully compliant with the laws and regulations around collection of PAYE tax.
Commenting on compliance in Kenya and Tanzania, Nikki Summers, Regional Director for Sage in East Africa, said that the tax collection authorities in both countries are scrutinizing more closely whether employers are complying with their tax obligations.
With a tax collection shortfall of Sh40 billion in the first four months of the 2017/18 fiscal year—which ends in July next year—the Kenya Revenue Authority can be expected to take tough line on enforcement in the months to come.
What’s more, the Treasury is currently reviewing the Income Tax Act with a view to increasing revenue, improving tax administration and sealing tax loopholes.
In Tanzania, PAYE accounts for about 17 percent of gross tax, accounting for the biggest share of tax revenues.
This is due to increased focus on controlling of revenue leakages in recent years.
“Without improving tax collection, East African countries will not be able to effectively finance the building of infrastructure and the provision of public services.
We are seeing Tanzanian and Kenyan tax authorities take a more robust approach to registering tax payers and enforcing compliance to help the governments meet their tax collection targets,” said summers.
It has become increasingly important to ensure that annual returns are filed and submitted promptly and accurately to the relevant tax authorities.
“Failing to comply – whether through deliberate evasion, late payment of payroll taxes underpayment as a result of a miscalculation –could cost your business dearly,” said Summers.