Economy

Wealthy aircraft, car owners get relief in KRA seizure plan

choppers

Lawmakers have opened a window for businesses and wealthy individuals to avoid prompt disposal of property for tax evasion. FILE PHOTO | NMG

Lawmakers have opened a window for businesses and wealthy individuals to avoid prompt disposal of property such as ships, planes, and cars for tax evasion.

The Finance and Planning Committee of the National Assembly has recommended further changes to the Finance Bill 2022, forestalling sell of frozen assets within two months to recover unpaid taxes.

The amendment, if approved by the House, will allow wealthy tax cheats to enter into a payment plan with the Kenya Revenue Authority (KRA), giving them more time to settle the arrears.

ALSO READ: KRA appeals ruling on Sh17bn alcohol tycoon tax evasion

The changes have been made under the proposed repeal of Section 40 of the Tax Procedures Act which will hand KRA Commissioner for Domestic Taxes powers to freeze and seize ships, aircraft and cars by issuing directives to respective registrars.

Currently, KRA can only stop the sale and transfer of land whose owners are suspected to have cheated or evaded paying taxes.

“Where a taxpayer fails to pay the tax liability…within two months after receipt of the notification, the Commissioner or authorised officer may, at the taxpayer’s expense, dispose the property … by public auction or private treaty… for the recovery of the tax,” the proposed changes read.

The proposed two-month period for settlement of arrears had elicited protests from a host of business lobbies like the Kenya Private Sector Alliance (Kepsa) and tax consultancy firms.

Kepsa successfully lobbied the Finance Committee of the National Assembly to make enforcement of the two-month settlement period conditional so that “where a payment plan has been agreed between the taxpayer and the commissioner, the liability shall be settled within the agreed payment plan”.

The committee in recommendation to the House argues that the proposed change to allow wealthy tax cheats more time “can be an avenue for tax recovery”.

“The two-month period within which a taxpayer ought to settle the outstanding tax, failing which their property will be disposed, is rather short,” consultancy and audit at Deloitte wrote in report on the Finance Bill 2022.

ALSO READ: Ndii set to pay KRA Sh2.8m in tax row

“Although this proposal is intended to enhance revenue collection by providing KRA with more options to recover taxes, we believe it could also infringe on the taxpayers’ property rights. Further, it might slow down transactions involving such assets, as it takes long to lift such caveats upon settlement or recoveries of the taxes in question.”

KRA enforcement unit has been using various databases, among them bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority, which reveal individuals who own assets such as helicopters to pursue suspected tax cheats.

[email protected]