Legislators have resisted a push from traders and business lobbies to extend the partial tax forgiveness on interest and penalties beyond June next year, citing revenue losses.
The Finance and Planning Committee of the National Assembly has recommended that the amnesty be set for 18 months to June 2025 for taxpayers who pay up principal taxes which had accumulated up to December 2022.
This means taxpayers who had applied for the initial pardon on interest and fines but never paid the arrears by the deadline of June 2024 will qualify for the partial relief if they clear the principal liabilities by June 2025.
Business groups and other stakeholders had argued that extending the compliance period would encourage more taxpayers to regularise their tax status and broaden the tax base, helping the Kenya Revenue Authority raise collections.
“The Committee noted that extending the amnesty period is likely to result in potential revenue losses and thus amended the amnesty period to cover from 31st December, 2023 to 30th June, 2025,” the Molo MP Kimani Kuria-led committee parliamentary team wrote in its report on Tax Procedures (Amendment) (No. 2) Bill, 2024.
About 1.06 million businesses and individuals with principal taxes in arrears amounting Sh54.50 billion applied for forgiveness during the initial window between September 2023 and June 2024, KRA documents show.
However, the revenue agency received Sh43.93 billion by the end of June, indicating that a fifth (19.41 percent), or Sh10.58 billion, of the amount due was not remitted.
KRA had warned that taxpayers who apply for tax amnesty and fail to honour payment by the end of the window in June 2024 would be subjected to enforcement measures.
Section 42 of Tax Procedures Act empowers the KRA to deactivate PINs, issue travel bans, collect cash due from the taxpayer’s banker and prosecute if the taxman has reasonable grounds that he will default.
Miriam Macharia, lead expert on tax amnesty in the Domestic Taxes Department, had earlier said the enforcement will be applied if the taxpayers does not honour a repayment plan within the 10-month window and cannot be reached through the contacts provided.
“If you feel that something might happen that bars you from honouring the plan, you need to make this plan with your debt manager so that they can give you another date so that you don’t default,” Ms Macharia had warned.
“So when you sign the amnesty agreement, you sign a contract to honour it. The danger of enforcement after you default is that we usually collect all the money we find so that you stop enjoying the luxury of time of having a payment.”
The collapsed Finance Bill 2024 had proposed the window be extended to March 2025, but this has been stretched to June 2025 under the proposed changes to the Tax Procedures Act.
