The deletion of a provision giving tax amnesty for landlords in the Tax Procedures Act has created uncertainty on the legal effect of the ongoing moratorium, experts at the PricewaterhouseCoopers (PwC) said Wednesday.
The same law also removed the provision on the application of the withholding value added tax, thereby creating even more uncertainty according to the experts.
During a meeting with the Press Wednesday, PwC managers said many taxpayers are unsure of the legal justification of the moratorium.
“Right now many people don’t know how they should justify receiving the amnesty. The Kenya Revenue Authority (KRA) is still applying it and have not denied the chance to those willing to take it up, but the legal force has been removed with the deletion of the provision in the Tax Procedures Act,” said Job Kabochi, a partner at PwC in Nairobi.
Mr Kabochi said the deletion was not intentional, but could have occurred due to the burden on the drafters as there have been many laws under review in the past five years.
With regard to the withholding VAT, the KRA said in March it was applicable and disregarded arguments that the provision had been deleted in the law. The authority said failure to pay the tax would result in accruing of interest and penalties.
“The commissioner has not revoked the appointments [of agents] so far made and the appointed agents are advised to continue with the operations [of collecting withholding VAT],” said the office of the Commissioner for Domestic Taxes in a statement two months ago.
On Wednesday, Mr Kabochi said it would have to take at least another six months before both issues are reviewed as is normal for Bills that have already been passed in Parliament.
“Eventually these laws have to be regularised even though the KRA is applying them. It cannot be sustainable that the law says one thing and the KRA interprets it as something else,” said Mr Kabochi.
The KRA, which did not respond to our enquiries on time, has been struggling to ensure landlords pay tax.
On withholding tax, suppliers of goods and services to government and large companies had sighed with relief after Parliament passed the tax procedures law that deleted provisions on the tax.
The removal of the withholding VAT had been seen as a result of implementation difficulties, where the burden was imposed on otherwise compliant taxpayers who were compulsorily appointed agents.
Titus Mukora, a director at PwC, said the coming Budget is expected to also make changes to the Income Tax Act to take account of, the announcement made by President Uhuru Kenyatta a month ago that earnings of those with minimum wage would be exempted from income tax.