This archive report was first published on 7 May 2020.
On May 7, 2020, the Kenya Revenue Authority (KRA) introduced a tax penalties waiver plan that could be a game-changer for businesses in the country.
According to the plan, firms and individuals who voluntarily disclose their tax liabilities will be exempt from punishment, making the KRA more business-friendly.
For years, KRA has been viewed as inhospitable by businesses due to its aggressive pursuit of tax cheats and firms avoiding duty payment.
Many firms have preferred to hide from the taxman to avoid huge penalties, while others opt for lengthy court fights.
However, the Treasury's legal amendments offer a glimmer of hope. The amendments provide for a waiver of interest and penalties on taxes that have not been paid in five years.
Under the voluntary tax disclosure plan, which will run for three years from January 1, 2021, those who declare pending liability and pay within one year will enjoy a 100 percent interest and penalty waiver.
Those who voluntarily disclose and pay the pending tax liability within the second year of the programme will receive a remission of 50 percent, while payments made in the third year will have a 25 percent relief.
This plan is commendable and could encourage firms and individuals to voluntarily declare accumulated bills, potentially boosting KRA's revenue collection.
As KRA seeks to meet its revenue targets, it must also be seen as a friendly and partner keen to see businesses succeed.
Aggressive actions, including freezing bank accounts and ordering tax remittance directly from clients' accounts, should be pursued as a last resort, as they have the potential to ground businesses and aggravate the unemployment crisis.
Considering that KRA detectives have identified wealthy individuals and companies that owe it an estimated Sh250 billion, an amnesty to these individuals and companies would be a 'win-win' deal that has the potential to recover the billions while avoiding acrimony.
