The new public procurement framework has granted the taxman a view of all payments, cornering rogue suppliers who have been dodging taxes after earning from the government.
Starting July 2025, the electronic government procurement (e-GP) integrated public procurement details with the Kenya Revenue Authority’s (KRA) iTax system, allowing individuals and companies to update tax details, file returns and register payments.
This essentially hands the taxman visibility of individuals and companies receiving payments from the State and pursue them for taxes.
So far, more than 16,000 government suppliers have been registered with the e-GP system.
The change comes amid revelations that companies dodged paying Sh147 billion in taxes in the year to June 2023 by underreporting revenues by nearly half-a-trillion shillings.
During an update on the status of implementation of the e-GP on Tuesday, Public Investments and Assets Management Principal Secretary, Cyrell Odede, said that the move would catch suppliers who register dummy companies to supply the government once, as well as others using multiple companies to pursue public tenders.
“In the old system, they knew it is only the withholding tax that the Treasury deducted and remitted to KRA, but getting these other people is very difficult because they use dummy companies for that particular transaction and they disappear,” the PS said.
The PS said that integrating the e-GP with iTax allows KRA to track transactions and pursue taxes from companies doing business with the government.
According to the Treasury, under the system, the e-GP will automatically relay information on contract awards and payments to iTax.
PS Odede, a former KRA deputy commissioner in charge of intelligence and strategic operations, says that the taxman has been facing challenges from individuals who register multiple companies to hunt for tenders and dodge taxes, a practice that the new system is set to flag.
“People used to have even 20 companies and tender with all of them. This time, e-GP has seen that because there are so many things that it is looking at. One of them is the address. If you are using one address in two or three companies, it will pick it out,” said the PS.
The taxman’s pursuit of tax-evading companies comes at a time when recent data showed that three-quarters of firms registered for corporate income tax (CIT) failed to pay taxes on earnings in the year to June.
According to KRA data, only 156,232 out of 618,201 companies on the corporate tax register paid taxes, reflecting a compliance rate of just 25.2 percent.
The proportion of companies that failed to pay taxes on corporate earnings rose from 401,274 in the year to June 2024, KRA said.
Audit report
In her latest report on the issue, Auditor-General Nancy Gathungu revealed that some 1,486 companies had failed to pay Sh147 billion in taxes after under-reporting their earnings by Sh490 billion in the year to June 2023.
The companies classified as large and medium taxpayers reported Sh2.5 trillion in revenues, while declaring value added tax (VAT), but they reported sales of Sh2.05 trillion when declaring income taxes, thus paying less corporation tax, the public auditor stated.
“Review of taxpayers’ declarations in iTax system from the Large and Medium Taxpayers Offices for the 2022/2023 financial year revealed that 1,486 taxpayers declared a gross turnover of Sh2,539,360,229,377 under the VAT obligation while the same taxpayers declared gross turnover of Sh2,049,318,070,324 under the income tax obligation resulting to an under-declaration of Sh490,041,822,592 turnover under the income tax obligation,” Ms Gathungu said.
“The under-declared turnover of Sh490,041,822,592 under the income tax obligation would have attracted a corporation tax of Sh147,012,647,716 which the Authority did not collect,” she added.
