170,000 seek KRA waivers on tax penalties

Times Tower, KRA head office. FILE PHOTO | NMG 

By JOHN MUTUA
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Summary

• Businesses and individual taxpayers have applied for waivers on tax penalties and interest amounting to Sh21 billion, an indication of their spirited effort to avoid property seizures and auction by the Kenya Revenue Authority (KRA) amid biting economic hardship due to the Covid-19 pandemic.
• Official statistics shows that a total of 170,000 businesses and individuals had by Sunday made formal applications for the waivers, beating a deadline set by the taxman last month.

Businesses and individual taxpayers have applied for waivers on tax penalties and interest amounting to Sh21 billion, an indication of their spirited effort to avoid property seizures and auction by the Kenya Revenue Authority (KRA) amid biting economic hardship due to the Covid-19 pandemic.

Official statistics shows that a total of 170,000 businesses and individuals had by Sunday made formal applications for the waivers, beating a deadline set by the taxman last month.

“The pending waiver applications are valued at approximately Sh21 Billion… KRA has now started processing the waiver applications,” the KRA said in a response to enquiries by the Business Daily.

As the review of the waiver applications got underway, the taxman said applicants are bound to prove financial distress which prevented them from paying up the amount owed or demonstrate that the fines were imposed erroneously.

“Should the taxpayers not provide the justification and evidence after the expiry of the 30 days, the KRA will reject all such applications. This then means that the KRA will take enforcement measures, after 90 days, to recover the tax arrears outstanding as provided for under the tax law,” the taxman said.

Besides seizure and auctioning of property, the KRA under the Tax Procedures Act of 2015 has powers to disable personal identification numbers (PINs), issue travel bans on defaulters, collect duty directly from suppliers and bankers of those with arrears but have disregarded calls to pay.

Should the KRA deregister the PINs, affected individuals and businesses will from November be cut off from all transactions requiring proof of active registration as a taxpayer, including registration of land titles, approval of development plans, registration, transfer and licensing of motor vehicles and registration of business names and companies.

In a bid to improve compliance, the KRA has offered waivers on tax dues accumulated for up to five years. This, it hopes, would entice firms and individuals to voluntarily declare such dues.

Under the voluntary tax disclosure programme, which shall run for three years with effect from January 1, 2021, the Treasury says those who declare pending liability and pay within one year shall enjoy 100 percent interest and penalty waiver.

The KRA’s pursuit of tax debt comes in the wake of an economic fallout due to the Covid-19 pandemic which has hit businesses and households, piling pressure on revenue performance. Thousands of firms have either cut back on the operations or shut down, leading to deep cuts on employee compensation or layoffs, which have impacted revenue collection.

The taxman raised Sh1.607 trillion in the year ended June but missed the Treasury’ target by Sh255 billion. In the 2020/21 period, the KRA is eyeing Sh1.62 trillion, banking of elimination of duty exemptions, nabbing tax cheats and collecting unpaid penalties.

The taxman last month said it had identified 1,309 businesses and individuals suspected of tax evasion and vowed to seal loopholes used to perpetuate the vice.

President Uhuru Kenyatta last November directed the revenue agency to hunt down wealthy individuals and firms that have for years evaded paying taxes and denied the country money to fund development projects.

The KRA early this year sought additional funding to hire 1,000 intelligence and enforcement officers in an effort to beef up the investigations on wealthy individuals and firms. The taxman targets to post its staff to businesses owned by high profile tax cheats.