Taxpayers are set to face fewer abrupt enforcement measures after the Kenya Revenue Authority (KRA) introduced a new compliance framework designed to identify tax discrepancies early and give businesses time to resolve issues before facing restrictions on the filing platform.
Acting Commissioner-General Lilian Nyawanda said the revised strategy is intended to minimise disruption for compliant taxpayers while still tightening oversight on non-compliant entities ahead of the June 30 filing deadline.
The shift comes after widespread criticism of the KRA’s previous “special table” system, which targeted firms suspected of involvement in fraudulent value-added tax (VAT) refund schemes.
The “special table” functioned as an administrative watchlist that blocked VAT-registered taxpayers with poor compliance records, including persistent non-filers and non-payers, from submitting returns.
Although the authority maintains that the system helped identify tax evasion networks, it also inadvertently affected thousands of legitimate businesses that became entangled due to transactions with flagged companies.
Speaking, Dr Nyawanda acknowledged that the system had served its purpose but said the KRA had learned valuable lessons from its implementation.
She noted that the authority eventually recognised the need to move away from the punitive structure and instead support taxpayers through a more progressive compliance process.
In March, the KRA publicly admitted that some compliance officers had abused the “special table” mechanism and ordered the removal of wrongly affected taxpayers.
The tool had originally been introduced to combat “missing trader” fraud schemes, where fake invoices are used to claim fraudulent VAT refunds. However, businesses placed on the watchlist were effectively shut out of the VAT filing process on the iTax system, making them commercially unattractive since trading partners could not claim input VAT from transactions involving them.
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Under the new approach, the KRA is rolling out a more focused system centred on early access to taxpayer information and real-time monitoring.
Taxpayers will now be able to view transaction data already held by the authority before filing returns, enabling them to identify and correct inconsistencies ahead of submission.
The system is already detecting mismatches, particularly among individuals and companies filing nil returns despite evidence of active transactions in KRA records.
Rather than imposing automatic penalties or blocking filings, the authority is now issuing alerts encouraging taxpayers to review and amend discrepancies in advance.
Dr Nyawanda said the goal is to improve transparency by allowing taxpayers to see the same information available to the authority and address potential issues before filing deadlines.
The new framework signals a broader shift towards what the KRA describes as a more collaborative and less punitive model of tax compliance, focusing on early engagement instead of reactive enforcement.
