The Kenya Revenue Authority (KRA) has rejected applications from at least 540 firms seeking waivers under the amnesty programme that has so far recovered Sh8.54 billion from defaulters and tax cheats.
The applications worth Sh287 million were rejected because the income declared was reportedly earned outside the qualifying period of July 1, 2015, to June 30, 2020, for the Voluntary Tax Disclosure Programme (VTDP).
Some applicants also failed to disclose some material facts while others were under investigation for other crimes.
“(We also rejected the applications) where an applicant was under audit or investigation, had been notified of an audit or investigation; or was a party to an ongoing litigation in relation to the tax liability,” the KRA told the Business Daily on email Friday.
The taxman revealed it had recovered Sh8.54 billion from businesses and individuals since the start the amnesty programme that cushions tax defaulters from penalties and legal suits.
It collected the amount from Sh9.561 billion declared under the programme from January 2021 to June this year.
“As at June 30 2022, Sh9.561 billion had been declared under the Voluntary Tax Disclosure Programme (VTDP). Out of this, Sh8.546 billion had been paid as at 30th June 2022,” the KRA said.
Some 855 firms and 940 individuals had declared their tax liabilities under VTDP in the period under review, with many more expected to come forward ahead of expiry of the programme in December 2023.
The three-year programme rolled out in January 2021, has seen the taxman exempt businesses and individuals suspected of tax evasion from penalties if they declare all their arrears and commit to paying them.
The programme is critical to the KRA’s plans to increase its tax collections and widen the pool of taxpayers by cutting down on tax evasion.
Taxpayers who declare their pending tax liabilities and pay within one year enjoy a 100 percent waiver on interest and penalty.
Those who make the disclosures and pay within the second year get a remission of 50 percent while those who declare in the third year get a relief of 25 percent.
The arrears must fall between July 1, 2015, and June 30, 2020, for a tax defaulter to qualify for the amnesty programme.
The programme has additionally saved businesses and individuals from stiff penalties that include travel bans, prosecution in court and collection of taxes from the supplier and bankers (agency notices).
Taxpayers are not eligible to apply for relief under the programme if under audit, compliance verification or investigation.
They are also not eligible if they have been served with a notice of intention to investigate or carry out an audit or compliance check for the undisclosed tax.
The KRA collected Sh2.03 trillion in the financial year ended June, exceeding its target by Sh149.9 billion. The taxman is targeting Sh2.14 trillion.
The ambitious target is pegged on nabbing more tax cheats and widening the pool of taxpayers as the taxman races to meet increased demands in an environment where debt repayment is gobbling over half of the collections.
Increased surveillance on tax cheats and the amnesty programme form the KRA’s two-pronged approach to the war against tax evasion.
The taxman has deployed more than 500 intelligence officers to gather information and has also upped the use of data to track businesses that are evading taxes.
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The KRA opened the amnesty window a year after its intelligence teams revealed that some 1,309 businesses and wealthy individuals were holding an estimated Sh259 billion, lifting the lid on the adverse impact of tax evasion to the economy.
It is increasingly embracing alternative dispute resolution mechanisms in an effort to unlock billions of shillings under litigation.
The taxman says it resolved 319 cases referred to arbitration in the first half of the current financial year ending June, which earned it Sh9.4 billion.
The taxman said this represents 57 percent of the cases referred to arbitration in the first half of the current financial year compared with 49.29 percent in the previous period.
The Alternative Dispute Resolution (ADR) mechanism was initiated by the KRA in 2015. The ADR mechanism is largely seen as the first layer of resolving disputes arising from tax audits before they are escalated to the Tax Appeals Tribunal and on to the courts.
The tax arbitration process, however, locks out cases that are criminal in nature such as tax evasion, malpractices and fraud.
“Over the years, ADR has gradually grown to be the preferred process in resolving tax disputes. During its inception in 2015, only forty-nine (49) cases were resolved. The number of cases resolved have since grown by more than 100 percent,” the KRA says.