The Kenya Revenue Authority (KRA) has a free hand to compel taxpayers to provide details of wealth they failed to disclose in their annual tax returns and offer the taxman free access to their records, computers and mobile phones.
This was the verdict of a High Court judge after he dismissed a suit challenging sections of the tax law that offered KRA unfettered access to people’s premises, records and devices as well as the need for the taxpayer to provide the information when required.
Activist Okiya Omtatah had challenged Sections 57, 58(2), 59 and 99 of the Tax Procedures Act, arguing that it infringed on taxpayers’ privacy by offering KRA full access to their dwellings, records and gadgets like computers and mobile phones.
The activist argued that it was unfair to compel taxpayers to provide information on their wealth and tax debt, which might be used against them in court, shifting the burden to the taxpayer. He had described the powers bestowed on KRA as rogue.
In a win for KRA, Justice Weldon Korir ruled that Mr Omtatah had failed to offer proof of how the laws were intrusive in pursuit of tax cheats. He also said the regulations were subjected to public participation before they became law.
“There is therefore sufficient and substantial reason for the limitation of the right (to privacy), as it is KRA’s mandate to ensure that all citizens abide by the laws relating to taxes and where they fail to do so, they are properly brought to justice with sufficient evidence to support the allegation,” judge Korir said. “It is obvious why the government collects taxes and why it is important that all taxpayers comply with tax laws.”
According to the judge, the provisions are only meant to enforce tax laws after a taxpayer fails to self-assess for payment to KRA or when evidence emerges of tax cheating.
The contested sections of the tax law, among other things, empower KRA to direct the taxpayers to produce records and information on their tax debt. “In any proceedings under this part, the burden shall be on the taxpayer to prove that a tax decision is incorrect,” says Section 56, adding that information provided by the taxpayers will be used against them in court.
Mr Omtatah had earlier argued that Section 58 amounted to a breach of privacy but was overruled.
“An authorised officer may inquire into the affairs of a person under any tax law, and shall at all times have full and free access to all lands, buildings, places to inspect all goods, equipment, devices and records, whether in the custody or control of a public officer, or of a body corporate or of any other person,” says Section 58.
KRA defended its powers, saying they were necessary to obtain all essential information in order to make a fair decision on the tax liabilities of a taxpayer.
KRA has been spying on bank accounts in an effort to crack down on tax cheats.
Lawyers and accountants have in the past argued that the taxman had stepped up its surveillance on their bank accounts as it seeks to match the flow of cash against tax remittances.
While bankers deny that they have been sharing clients’ data with KRA in the absence of court orders, the taxman admits to having received financial account records from banks in its quest to unearth tax cheats.
Bank clients have always believed that their account details are secret and beyond the prying eyes of the taxman.
KRA’s enforcement unit has been using various databases to pursue suspected tax cheats, including bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority (KCCA), which reveals individuals who own assets such as aircraft. Car registration details are also being used to smoke out individuals who are driving high-end vehicles but have little to show in terms of remitted taxes.