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Kenya: Kenya Revenue Authority (KRA) shut the door on manual filing of tax returns on March 1 with the adoption of a new electronic tax management system.

Dubbed i-Tax, the system replaces the old legacy platform and makes it easier for taxpayers to access various services such as updating registration details, filing tax returns and making payments and enquiries about the status of their tax ledgers - from the comfort of their homes and offices.

i-Tax also provides an integrated view of a taxpayer including updated information such as county, employer, mobile phone contact, unique e-mail address and tax agent - crucial information that was not previously captured by the old system.

Understandably, the system upgrade is part of what KRA needs to increase efficiency, ensure better compliance with tax laws and end the winding queues that snake around tax payment centres every mid-month.

With a little modification, the i-Tax system would ably handle essential services including issuance of tax clearance certificates and driving licences.

It is with these expectations that the announcement of a system upgrade late last month was greeted. To the taxpayer, the new system means less man-hours spent on queuing to file tax returns and that one can retrieve their tax records at the click of a button.

However, the collapse of the system hours after the switch-on and inordinately long downtimes have cut short taxpayer celebrations. Several functions including application for PIN numbers, VAT, PAYE and withholding tax returns have either stalled, or are taking extraordinarily long to complete.

Confused

What ought to have been a seamless transition from manual to electronic filing has since turned into grief - with taxpayers making endless trips to KRA offices for inquiries on how to use the new system.

More surprising is the fact that some employees did not appear to know what was happening - they had neither news of the system nor did they understand the cause of frequent downtimes.

The situation made for an uncomfortable conversation between anxious taxpayers keen to beat the March 20 deadline and a bewildered staff not knowing what to say or how to help.

A few home truths would suffice here: The success of any tax system is how easy it is to comply with its regulations. Beyond making tax administration relatively easy, an effective tax system plays an even bigger role defining a country's business environment.

No doubt KRA is working to ensure the system stabilises because it is a laudable effort at reducing waste in Government in line with the Government's new agenda.

This being the case, there should be some recourse for taxpayers who fail to submit their returns on time.

The Obama budget: What taxpayers should know

President Obama's budget proposal for the federal government's 2015 fiscal year is more than 1,500 pages long, with $3.9 trillion in spending proposals. But even though most political experts have already declared the Obama budget dead on arrival, the initiatives that the president chose to stress in his budget still carry valuable insight into what the administration will see as its priorities for the rest of this election year. Smart taxpayers will want to use that insight to predict coming tax changes that could get through Congress and past the president's desk. Let's take a look at some of the major tax provisions of the Obama budget and how they would affect you.

Raising tax revenue

The Obama budget includes several provisions that would increase taxes dramatically on upper-income earners. The largest is a proposal to put a 28% limit on the value of itemized deductions and certain items that are excluded from taxable income, including contributions to traditional IRA, 401(k), and other qualified retirement plan accounts. Although those in the 28% tax bracket and below would still get the full value of such tax breaks, those in the 33%, 35%, and 39.6% brackets would see the value of their deductions drop substantially. The White House Budget Office projects that such a move could raise $600 billion over the next 10 years.

Other tax-raising items include the implementation of what has become known as the "Buffett Rule," which would ensure that those making $1 million or more pay an effective tax rate of at least 30%, regardless of deductions other than charitable contributions. The impact of the provision is relatively small, with estimates of about $53 billion in revenue over the next decade, but the tax is squarely targeted at the highest levels of income.

Also, the president would limit the maximum balance in tax-favored retirement accounts so as to prevent wealthy individuals from establishing tax-deferred assets above certain levels. The exact limits are determined by complex actuarial calculations geared toward establishing the maximum annuity allowed under pension law, but according to estimates from the Tax Policy Center, the limits last year for a 62-year-old would have been $3.4 million, but a 40-year-old's limit would have been only $1 million.

The budget also aims to cut certain loopholes. Private-equity firms Carlyle Group, Apollo Global Management and Blackstone Group won't like provisions ending the tax preference for carried interest. Even though Carlyle, Apollo, and Blackstone won't necessarily see their corporate profits affected, the ripple effect could have negative effects in the industry and have implications for compensation costs and other expenses. In addition, S corporation shareholders and other professional services firms will no longer be able to shelter income from payroll taxes by splitting it into salary versus business profits.

Finally, the budget would raise estate taxes back to their levels from several years ago. The rate on taxable estate would rise to 45%, and the exemption amount would drop from its current $5.34 million to $3.5 million. Continue reading…