LAGOS, Nigeria, Dec 14 – Revenue authorities in Kenya and Tanzania have tightened the noose on businesses and individual tax payers, to ensure maximum revenue collection as they seek to achieve their annual revenue targets.
According to Software company — Sage Group ( Plc), governments in the East Africa region are clamping down on non-compliance as they strive to raise more funding for public spending, as the Pay As You Earn (PAYE) tax year-end looms.
This 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, Sage regional director for East Africa Nikki Summers said tax collection authorities in both countries are scrutinising 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.
Kenya’s National 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 per cent 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,” Summers said.
This means that businesses must ensure that they declare the correct earnings for all employees and that they include the right taxes and statutory deductions in payroll calculations.
According to Summers, it is 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,” she said, adding “You could face large fines and penalty interest for underpayment of taxes and statutory deductions.”
This comes as governments continue to invest heavily in digital processes while phasing out manual filings.
Automated solutions are becoming more essential for keeping reliable records and performing accurate payroll calculations, according to the company.
“Because compliance is complex and the risks of non-compliance are high, East African businesses can no longer rely on spreadsheets and other manual methods to do their calculations and file returns,” Summers said.
Payrolls can be automated using software solutions.
The company offers Payroll automation software —with solutions available for businesses from start-ups to mid-sized companies and larger enterprises.
The software takes care of calculating the complex formulas for the various deductions, generating compliance reports, and keeping accurate records.
That makes it easier to perform accurate calculations, file submissions on time and generate reports and electronic payslips.
Automation makes it easier to keep track of changes to tax regulations that impact on payroll tax calculations and various changes in legislation.
The software is constantly updated to align with the latest tax laws and tables, so one needn’t to update spreadsheet formulas or learn to make new manual calculations when changes are made.
“Business builders don’t go into business because they love filing tax returns. Using automated payroll software can help them save dozens of hours a year because they no longer need to worry about doing manual calculations or returns,” she said.
Automation also reduces the possibility of human error.
The Sage Group (Plc) is a British multinational enterprise software company headquartered in Newcastle. The Group develops, publishes, and distributes accounting and payroll software for personal computer systems.
Via its subsidiaries, Sage also maintains a registered user database which provides a market for their related products and services, including computer forms, software support contracts, program upgrades, and training.