Sometimes you have no choice but to cheat the system!

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

12 June 2016

Steve Mukhwana has a message for the Kenya Revenue Authority (KRA): “i-tax si rahisi! [i-tax is not easy!]”. In case you are lost, KRA has been running promotional adverts to remind and encourage taxpayers to file tax returns on the online platform christened “i-tax”. The overriding message is “i-tax ni rahisi [i-tax is easy]”.

Well, not according to Steve who says: “I am a freelance teacher. I teach children at their homes. I don’t have an office so my business has no assets and no employees.

“[In the past]…all I needed to do was state what I am paid in a year, [then] subtract my costs [in order to get] the profit. But this year when I tried to do that on i-tax, it asked me for so many things that I do not understand.

“The income calculation now needs over 100 entries and there are another 30 new financial statements that are required. Honestly, I am now thinking I will stop paying tax – it has become too complicated to calculate!”

I concur with Steve: while the i-tax system is easy for people in employment, it is unnecessarily complicated is for those doing businesses. Nevertheless, if you take some time to study the forms (Steve is a teacher, after all) you notice that the vast majority of them can be left blank; except the “profit and loss” and the “balance sheet”.

In the “profit and loss” form, the taxpayer should fill only the costs that are relevant to him and ignore the rest. In addition, there is space provided to “manually” type items that are not in the prepared list.

The balance sheet is a bit trickier: It is a listing of what you own compared to what you owe. While this is important for you to establish your financial status, it is not necessary for tax computation. We pay taxes for what we earn, not what we own!

As Steve rightly noted, KRA never used to ask for balance sheets in the past. Unfortunately, it is mandatory in the i-tax system. The difficulty that most people will face is in trying to retrieve the information needed from their archives.

The first part of the balance sheet calls for a listing of assets; now how is a man like Steve expected to remember how much he paid for the second-hand desk that he picked from Dagoretti-Corner 12 years ago? Road-side traders often don’t issue receipts – and even if they did…!

In view of this, I will recommend that you cheat i-tax – the system, not the taxman! First you make an intelligent guess of the amount of money you used when starting up. Enter this as proprietor’s capital. Next, enter the exact same amount as your “other assets”. This will immediately balance your “balance sheet”. Leave all the other entries blank and upload the form.

Hopefully, by next year, KRA will have adjusted the i-tax forms so that the balance sheet is not a mandatory document.