Companies will file tax returns for 2010 on behalf of their workers, the Treasury maintained on Wednesday, handing relief to thousands of workers who had been caught up in confusion over the commencement date of a proposal by Finance minister Uhuru Kenyatta.
With just seven days to the June 30 deadline, most employees were anxious of their fate amid contradicting positions by the Kenya Revenue Authority (KRA) and the Finance Ministry over the commencement of the new rules.
In his Budget proposals for 2011/12, Mr Kenyatta recommended that employers file tax returns on behalf of their workers to avoid duplication. He also proposed amendments to the Income Tax Act to make it compulsory for taxpayers to apply for personal identification numbers (PIN) as a way of beating potential tax evaders.
Most employees and employers interpreted Mr Kenyatta’s proposals to have taken effect immediately, contrary to KRA’s position that they only applied in the next financial year which starts in July.
But on Wednesday, officials at the Treasury said Mr Kenyatta’s proposals were already in force as per the provisions of the Finance Bill 2011.
“The date on the Finance Bill 2011 is very clear with regard to the commencement date of the changes. The amendment takes effect immediately as per date indicated in the Bill,” Dr Henry Rotich, the deputy director of economic affairs told the Business Daily.
The changes in the Finance Bill are dated June 8,2011—meaning that the new rules are well in force ahead of the June 30 deadline when all employees are required to have filed all their tax returns for 2010.
KRA management Wednesday afternoon backtracked on its earlier stand and said employers would be allowed to file returns on behalf of their respective workforce.
Mr John Njiraini, the commissioner for domestic tax at KRA, however warned employees to ensure their returns were accurately presented by their employers.
He said KRA would encourage employees capable of filing individual tax returns to do so voluntarily.
Insiders said KRA is uncomfortable with the directive that allows all employers to file taxes on behalf of their employees owing to concerns over poor compliance and integrity levels among some companies.
It is feared that some companies could present falsified information on employees and evade taxes.
“Even when the minister’s proposals come into effect, employees in some companies would still be required to file individual tax returns. Not all employees will be cleared of this role,” a senior source at KRA said on Tuesday.