KRA’s Tax Amnesty: Empowering Taxpayers For A Win-Win Scenario

Steve Biko Wafula

2 years ago

In a significant move to boost tax compliance and provide financial relief to taxpayers, the Kenya Revenue Authority (KRA) introduced a tax amnesty program, aiming to collect Ksh 50 billion within 10 months.

KRA Commissioner General, Humphrey Wattanga, stated that this initiative is designed to assist those who incurred penalties for failing to settle their tax obligations by December 31, 2022, or who have accrued interest and fines.

As an entrepreneur, I would like to delve into the tax amnesty issue and be able to have a comprehensive analysis of the KRA’s tax amnesty program, its eligibility criteria, the application process, and its implications for both taxpayers and the government.

The Amnesty Program Explained

The tax amnesty, as outlined in the Finance Act, of 2023, allows for the waiver of fees, interest, and penalties on tax debts that were outstanding before December 2022.

Taxpayers who clear their principal tax can also apply for a waiver on the associated interest and fines. The amnesty guidelines, issued by KRA, specify the following key eligibility criteria:

Automatic Amnesty: Taxpayers who have interest and penalties but no outstanding principal taxes for periods up to December 31, 2022, qualify for automatic amnesty. They do not need to apply.

Principal Tax Amnesty: Taxpayers with outstanding principal tax accrued by December 31, 2022, must apply for amnesty. Their application should be accompanied by a proposed payment plan for the outstanding principal taxes.

Exclusions and Limitations

The tax amnesty does not apply to penalties under section 85 of the Tax Procedures Act, which relates to tax avoidance. Tax avoidance refers to transactions or schemes designed to evade tax liability. Under this provision, the penalty for tax avoidance is equal to double the amount of tax that would have been avoided.

Furthermore, any outstanding principal tax as of December 31, 2022, that remains unpaid by June 30, 2024, will not qualify for amnesty. Interest and penalties will be imposed on such unpaid amounts.

Application Process

To apply for the tax amnesty, eligible taxpayers should use the KRA’s iTax system. The application process involves:

Accessing the iTax system to view the taxpayer’s debt status across various tax categories.
Selecting the relevant periods and tax heads that qualify for the amnesty.
Making a full payment of the outstanding principal tax or negotiating a payment plan with the KRA Commissioner.
For those opting for installment payments, specify the payment frequency within the system-embedded payment plan agreement. This agreement cannot extend beyond June 30, 2024.

Upon completing the agreed payment plan, taxpayers will be granted amnesty, and any penalties and interest related to the principal tax during the amnesty period will be waived.

Benefits and Implications

The tax amnesty program is designed to help taxpayers clean up their tax ledgers by removing penalties and interest for those who’ve cleared their principal tax by December 31, 2022. It also offers a valuable opportunity for taxpayers to pay their outstanding principal tax accrued up to December 31, 2022, by June 2024, in exchange for a waiver of tax penalties and interest.

Importantly, this program is timely, considering that the Voluntary Tax Disclosure Programme (VTDP) is set to conclude on December 31, 2023. The success of the VTDP underscores the potential for an amnesty program to drive compliance and revenue collection.

The tax amnesty program is a mutually beneficial arrangement for both taxpayers and the government. Taxpayers can benefit from the reduction of penalties and interest while regularizing their tax affairs and saving money. Simultaneously, the government, through the KRA, aims to increase revenue collection.

In essence, taxpayers are encouraged to seize this opportunity and apply for the tax amnesty program, ensuring they pay their principal taxes by the specified deadline. For any inquiries related to the amnesty program, taxpayers should consult with their tax advisors or the KRA.

As the tax amnesty program unfolds, it represents a significant step towards a fair and inclusive economy for all Kenyan citizens. Beyond the immediate financial relief it offers to taxpayers, the tax amnesty program has broader implications for Kenya’s economic landscape. By encouraging tax compliance and reducing penalties and interest, this initiative fosters an environment of financial stability for both individuals and businesses.

Moreover, the program aligns with President William Ruto’s vision of a fair and inclusive economy. It acknowledges the financial challenges many taxpayers face and provides a means for them to regain their financial footing. This not only alleviates individual burdens but also contributes to overall economic growth and inclusivity.

In light of this, the tax amnesty program has the potential to bring about the following significant impacts:

Enhanced Compliance: Taxpayers who might have previously avoided paying taxes due to accumulating interest and penalties now have a strong incentive to settle their outstanding tax debts. The program catalyzes tax compliance, ultimately contributing to increased government revenue.

Reduced Tax Evasion: By addressing the issue of tax avoidance penalties, the program sends a clear message that the government is committed to closing tax loopholes. This can act as a deterrent for individuals and businesses considering tax evasion schemes.

Economic Growth: When taxpayers can clear their tax arrears, they free up resources that can be reinvested in businesses, job creation, and other productive endeavors. This, in turn, contributes to economic growth and job opportunities.

Fairness and Inclusivity: The tax amnesty program aligns with Kenya’s commitment to achieving a fair and inclusive economy. It ensures that even those who may have faced financial hardships in the past can regain their financial standing, fostering a more equitable society.

Legislative Reforms: The introduction of the amnesty program underscores the importance of legislative reforms in the Kenyan tax system. As the government adapts to economic challenges and taxpayer needs, it paves the way for more responsive and effective tax policies.

The Kenya Revenue Authority’s tax amnesty program represents a vital step in promoting financial stability, tax compliance, and inclusive economic growth. While the primary goal is to assist taxpayers in resolving their tax issues, the program has far-reaching implications that can positively impact Kenya’s economy and society as a whole.

As the program unfolds, it will be crucial for eligible taxpayers to take advantage of this limited-time opportunity and engage with tax professionals or the KRA to ensure they meet the requirements and deadlines. By doing so, they can not only resolve their tax issues but also contribute to the development of a more prosperous and equitable Kenya.