The penalties that had been put in place by the Kenya Revenue Authority (KRA) for tax defaulters are set to be dropped.
Unlike the current law where tax defaulters are fined based on the total amount of tax due in the preceding year, in the new proposal fines will be based on only the amount not paid to KRA.
“The amount of tax payable or due under the return shall be reduced by the amounts already paid and withholding tax credits,” reads the proposed amendment to Section 83 of the Tax Procedures Act through the Finance Bill 2019.
KRA had initially given notice to Kenyans who had not filed their annual tax returns by the deadline which is usually every 30th June, to pay their penalty in 15 days or risk having their Personal Identification Numbers (PIN) deactivated.
Employees in the current law pay a fine of 2000 shillings or five percent of the tax payable in the year under review, or whichever is higher.
For companies that default filing returns, there is a fine of 20,000 shillings or five percent of the tax payable in the year under review, or whichever is higher.
The fining of employees and companies under the existing law not only ‘punishes’ taxpayers for the missing the deadline but is also burdensome considering they may have been paying taxes.
According to Commissioner for Domestic Taxes Department, Elizabeth Meyo, if the proposed law is approved by parliament and eventually signed by the president, it will lessen the burden of employees and companies that will have already paid taxes as a reward for paying taxes on time.
“Previously, taxes were imposed on all due liabilities without giving credit of withholding tax already paid. The iTax system will now impose a penalty only on unpaid taxes,” she said.