Legal experts have faulted the taxman’s announcement that he will deactivate the Personal Identification Numbers (PINs) of non-compliant taxpayers, terming it illegal.
Lawyers said holding a tax PIN is the right of every citizen that cannot be taken away by fiat without following due process.
“KRA does not issue PINs to citizens as a favour but as provided for in law, in the same way the Department of Registration of Persons issues Identity Cards or Passports,” said Nairobi lawyer Nashon Aluoka.
“It is an instrument that every adult needs to transact the business of life and meet their obligations as citizens and can only be taken away as provided for in law or through a court order,” he said.
The KRA, Mr Aluoka said, has not made clear which law it will be relying on to take such punitive action that is likely to disrupt the lives of millions of Kenyans who may not even be owing any taxes.
The agency has said it will on September 1 deactivate all PINs whose bearers have not migrated to the iTax platform or failed to file taxes as required by law – opening a legal lacunae that may force employers to withhold the salaries of affected employees.
The KRA said last Friday that it had informed employers that they will be committing an illegality if they pay salaries to employees whose PINs have been deactivated. But Mr Aluoka said the taxman would face swift legal action if it acted with such impunity.
“Millions of Kenyans, whose PINs are going to be deactivated do not even qualify to pay taxes and only file tax returns as a matter of procedure but require the PIN to access services and conduct business with fellow citizens or with the government,” Mr Aluoka said, adding that the law could not let the KRA act with discretion over such a serious matter.
Employers act as the KRA’s agents for purposes of collecting income tax. Upon paying staffers, employers are required to remit the taxes by the 9th of the subsequent month.
These are the payments that employees find on the P9 forms (issued by their employer) and which they use to file annual returns between January 1 and June 30 of every year.
Deactivating the PIN would therefore prevent an employer from meeting the monthly filing obligation.
“iTax cannot accept an employer’s PAYE return where the payroll contains employees without PINs or has invalid PINs. It is the responsibility of both the employer and the employee to ensure that the employee has a PIN,” the KRA said in response to queries on the impending action.
Thousands of employees skip filing annual returns while others are yet to migrate to the iTax platform four years after its launch, making them targets of the impending action.
Another set of taxpayers have regularly updated their profiles on the KRA portal but, for nefarious (tax evasion) or purely lethargic reasons, do not file returns when they fall due. iTax, which was made the mandatory tax payment platform in August 2015, enables taxpayers to file returns from any location with Internet connection.
Fresh data from the KRA shows that there are 10.6 million registered taxpayers but only 5.8 million are registered on iTax. In the 2016 filing period, which closed on June 30, only 2.4 million taxpayers filed their returns.
“Upon fulfilment of compliance requirements the same PIN will be reactivated. Taxpayers (will) maintain their PINs initially allocated as the supporting documents used for registration do not change,” the taxman said.
“There is no penalty for PIN reactivation,” KRA said, adding any penalties accrued by non-compliant taxpayers will have to be settled before their accounts are restored.
The KRA, which is under pressure to meet the ever rising revenue targets, is now seeking to prevent non-compliant taxpayers from undertaking transactions that require PINs in a bid to force compliance.
Transactions that need active PIN certificates include registration of titles, approval of development plans, registration, transfer and licensing of motor vehicles, registration of business names and companies.
Others are underwriting of insurance policies, customs clearing and forwarding, payment of deposits for power connections, supplying goods and services to the State, as well as opening accounts with financial institutions.