The National Treasury Cabinet Secretary will have powers to waive penalties and interest on tax agents who fail to surrender their collections to the State on time if Parliament approves proposed changes to the Kenya Revenue Authority (KRA) Act.
National Assembly Majority Leader Kimani Ichung’wa has tabled the Kenya Revenue Authority (Amendment) Bill, 2024 to Parliament to effect the changes—which if granted would give the Treasury CS significant powers considering that these penalties and interest can sometimes run into billions of shillings.
“The Cabinet Secretary may waive part of the whole of the penalty under subsection (3), where the person has transferred the funds to the Central Bank in full,” says the Bill.
This will, however, only apply where the tax agent can provide evidence that the delays in transferring the collected tax to the Central Bank of Kenya accounts were not deliberate.
Some of the companies that have recently found themselves in hot soup over the law requiring prompt transfer of taxes to the State’s coffers are KCB Bank and Spire Bank.
KCB paid a tax penalty totaling Sh2.134 billion to the KRA in the fiscal year 2022/23 for delaying transferring tax revenue to the tax agency.
Spire Bank also paid a penalty of Sh152.24 million for the same offence, KRA revealed in its financial statements for the year to June 2023.
Earlier this year, SBM Bank Kenya revealed that KRA had hit it with a Sh737 million tax penalty. The penalty related to an agency contract KRA had with the lender when it was trading as Fidelity Commercial Bank (FCB) before its acquisition by Mauritius’s SBM Group seven years ago.
The tax claim related to penalties on taxes that were collected by FCB on KRA’s behalf.
The proposed changes to the KRA Act will also benefit companies that have been placed under receivership or are in statutory management.
“Provided that failure to transfer the funds is as a result of a system downtime that prevented the transfer of funds, and the matter has been promptly reported to the Commissioner,” says the Bill.
