The Kenya Revenue Authority (KRA) has found itself in conflict with banks over its latest effort to integrate its tax collection system with financial institutions.

This move, facilitated by the Tax Procedures (Amendment) Act of December 2024, is aimed at improving tax compliance and identifying potential tax evaders.

However, the proposal has faced significant resistance from the banking sector, highlighting concerns over data privacy, regulatory gaps, and the protection of customer information.

The Core of the Standoff

At the centre of the dispute is KRA’s plan to link its system with 38 banks operating in Kenya. This integration would provide the tax authority with direct access to financial transactions, a move it argues will strengthen tax enforcement mechanisms.

However, banks, represented by the Kenya Bankers Association (KBA), have strongly opposed the initiative, citing serious data protection concerns and the absence of a well-defined legal framework to govern such data sharing.

During a recent workshop that brought together KRA officials, lawmakers, and financial industry representatives, discussions on how to implement the integration in a manner that safeguards customer confidentiality ended in a stalemate.

Banks are insistent that KRA’s proposal lacks sufficient safeguards to prevent potential misuse of customer financial information, despite the authority’s assurances that the move aligns with national tax collection objectives.

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Existing Legal Framework vs. Banks’ Concerns

The banks argue that the current Data Protection Act of 2019 provides clear guidelines on how personal data should be handled.

Under this law, data sharing is only allowed with individual consent or when legally required for matters related to national security or public interest.

Financial institutions are particularly concerned that KRA’s proposed system integration model does not align with these principles, unlike their existing collaboration with the Central Bank of Kenya, which allows for regulatory oversight while maintaining customer anonymity.

Moreover, banks insist that additional legal safeguards must be put in place before any such integration can be implemented.

They fear that giving KRA direct access to bank records without clear guidelines could lead to breaches of customer confidentiality and unintended regulatory challenges.

KRA’s Argument for System Integration

KRA maintains that the integration with banks is necessary to enhance tax compliance and curb tax evasion. The authority already leverages multiple data sources, such as import records, motor vehicle registrations, and utility bills, to track suspected tax cheats.

By linking directly to bank transactions, KRA believes it can fill tax revenue gaps and enforce tax laws more efficiently.

Additionally, KRA argues that the integration would not be an unnecessary measure but rather an enhancement of existing tax enforcement mechanisms.

The tax body insists that adequate measures will be in place to prevent unauthorised access and misuse of financial data. However, with no concrete implementation agreement in place, the banks remain unconvinced.

Simplifying Tax Compliance: Navigating KRA Portal, eTIMS, and iTax Services

Navigating the KRA portal is essential for taxpayers looking to manage their obligations efficiently. Whether you need to complete your KRA Registration, file KRA returns, or access services like KRA iTax login, the platform provides a seamless experience.

The introduction of eTIMS – KRA has further streamlined tax compliance, ensuring businesses can integrate Kra etims for real-time invoicing.

Additionally, users can conveniently access their tax profiles through KRA login, making it easier to stay compliant with regulations under the KRA iTax system.

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The Road Ahead: Seeking Common Ground

With both sides holding firm on their positions, the path forward will require extensive consultations and possible legal amendments.

Financial institutions are pushing for a framework that explicitly defines the scope and limitations of data sharing, ensuring that KRA’s access does not violate customer rights or banking confidentiality regulations.

Lawmakers will likely play a key role in facilitating a middle ground, balancing the need for tax compliance with the essential to uphold data privacy.

If no resolution is reached, KRA may have to explore alternative tax enforcement strategies that do not involve direct access to bank systems.