The introduction of prepopulated income tax returns was welcomed as a step toward modernising tax administration. The promise was straightforward: that taxpayers would benefit from returns pre-filled with information already available to the Commissioner, reducing errors, easing compliance burdens and improving efficiency.

However, the final implementation has taken a different form. Instead of the envisaged pre-population, the KRA has introduced a validation mechanism that compares taxpayer-declared incomes and expenses against data held within its systems, drawing from multiple sources, including eTIMS invoices, withholding tax filings and customs data captured through the Integrated Customs Management System (ICMS).

To support taxpayers, portions of this data are available for download via iTax, accompanied by user guides on how to align returns with KRA records. Certain items such as depreciation, airline passenger ticketing and staff costs are excluded from validation, while all others are subject to system checks at the point of filing.

On paper, this appears structured and logical. In practice, the experience has proven far more complex.

Taxpayers and practitioners continue to report material discrepancies between business records and the KRA’s data. Instances of duplicated sales transactions have resulted in inflated income amounts.

Expense information is often incomplete, particularly where the underlying data sources do not capture the full range of deductible business costs. Yet these same figures are being used as the benchmark against which taxpayers’ returns are validated. The result is a compliance process that places taxpayers in a frustrating position.

Businesses already invest heavily in maintaining accounting records, operating financial systems and engaging auditors to ensure that financial statements are accurate and independently verified. These processes are designed to produce reliable figures for tax reporting.

Nonetheless, even where accounting records and audited financial statements are accurate and properly supported, returns may still be rejected because they do not align with system-generated figures.

In the looming shadow of the return filing deadline, taxpayers are now having to incur additional costs to enhance their systems or otherwise outsource digital solutions in relation to tax technology in hopes of procuring timely tax reconciliations.

These challenges undermine the compliance efforts and costs traditionally borne by taxpayers prior to the point of filing a return.

More concerning is the limited transparency within the validation process itself.

When a validation error occurs, taxpayers are typically presented with a single aggregated figure representing their expected income or expense position.

However, the error message provides little information that would assist taxpayers in resolving the discrepancy. It does not show the corresponding amount declared in the return, the variance between the two figures, or any indication of transactions that may be driving the mismatch.

Worse still, in some instances, the amount displayed as the expected total turnover or expense position varies from the data available for download on iTax.

From the user guides shared, KRA has indicated the variance in expenses could relate to entries in the download data such as duplicates and self-supply transactions that are excluded from the total downloaded figure before validation.

This creates an obvious problem. If the system excludes certain transactions when validating a return but continues to display the unadjusted downloadable totals in its validation message, taxpayers are effectively being shown figures that do not represent the amount actually being validated against the return, therefore rendering the taxpayer’s reconciliation process futile.

The writer is a tax consultant, Deloitte & Touche East Africa.