As John Mbadi transitions from his role as an MP to the Cabinet Secretary for National Treasury and Economic Planning, significant changes are on the horizon for the Kenya Revenue Authority (KRA).
In his farewell speech to Parliament, Mbadi outlined a comprehensive plan to reform KRA, emphasizing principles of corporate governance and the recruitment of competent officers.
Planned Changes at KRA
Mbadi highlighted the necessity of employing corporate governance principles in KRA's management, akin to other corporate bodies.
He stressed the importance of clear distinctions between the roles of the board chairperson, the board itself, and the commissioner general as the CEO, alongside other management officers.
There have been reported cases of conflict regarding the roles of the chairman and the commissioner general.
This conflict primarily stemmed from the actions of the current KRA chairman, Anthony Mwaura, who has been described as adopting an assertive leadership style that blurs the lines between the board's oversight responsibilities and the executive functions of the Commissioner General.
Mwaura has in the past made announcements that are ordinarily deemed to be the purview of the commissioner general who is the chief executive officer.
"We must employ the principles of corporate governance in the management of KRA just like any other corporate body," Mbadi stated.
"There should be a distinction between the role of the chairperson of the board, the board as a whole, and the commissioner General as the CEO, and the management officers of KRA," the CS added.
This comes as the KRA chairman is challenging a High Court decision that declared his appointment illegal.
The court faulted President William Ruto's decision to appoint Mwaura who had an active corruption case at the time.
He has appealled the decision at the Court of Appeal which has suspended an order to remove him from office pending the hearing of the appeal.
Mwaura has also been criticised for holding a role in UDA as the chairman of the party's National Elections Board.
Recruitment of graduate trainees
Incoming Treasury CS Mbadi also underscored the need to revert to successful policies of the past, particularly the recruitment and training of graduate trainees in KRA.
These trainees would be trained both in class and on the job to ensure they are well-prepared for their roles.
"I favor the policy where graduate trainees were recruited and trained both in class and on the job. We need to resort to policies that worked at the Kenya Revenue Authority before," he added.
Salvaging the Finance Bill 2024
Mbadi also addressed the Finance Bill 2024, which President Ruto withdrew following nationwide protests. While acknowledging the controversy surrounding the bill, Mbadi proposed to salvage its positive provisions.
Key among these provisions are making the housing levy and post-retirement medical contributions deductible, which would alleviate the financial burden on salaried employees.
Additionally, the bill proposed restoring the provision for tax relief due to doubt or difficulty in recovery, allowing the commissioner to manage uncollectable taxes under unavoidable circumstances, though he noted the need to balance this with controls to prevent abuse.
Other proposals include extending the tax amnesty program under Section 37E of the Tax Procedures Act for another year, providing a quick win for both taxpayers and the government.
This extension would help the government recover uncollected taxes while offering relief to taxpayers.
Expanding the Tax Base and Improving Business Environment
Mbadi highlighted the importance of expanding the tax base to collect taxes from traditionally hard-to-collect sectors.
This strategy aligns with the national tax policy and aims to protect existing businesses from over-taxation.
"We must protect the goose that lays the golden egg as we find other geese to lay more eggs," he metaphorically explained.
He also expressed his commitment to improving the ease of doing business in Kenya. Mbadi intends to work with the planning department, other government departments, and relevant stakeholders to review data and legislation to enhance business operations in the country.
Commitment to Prudent Fiscal Management
Mbadi reiterated his commitment to the prudent use of Article 223 of the Constitution, which governs the use of public funds.
Article 223 of the Constitution of Kenya allows the national government to spend money without the prior approval of Parliament in certain circumstances.
He emphasised the need for checks and balances to ensure balanced budgets and reduced expenditures.
"If we manage our debt and the application of Article 223 of the Constitution, we have better balanced budgets. We may not need to over-tax because we will have reduced the expenditure side of the budget," he stated.
As Mbadi takes over the reins at the National Treasury, these planned reforms and his strategic vision are poised to significantly impact Kenya's fiscal policy and economic environment.