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Illegal tax agents risk two years in jail

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Treasury secretary Henry Rotich. FILE PHOTO | NMG

Treasury secretary Henry Rotich has published tough new regulations that could see illegal tax agents, who have been helping individuals to evade tax, serve up to two years in jail.

The move follows recent findings that an increasing number of unlicensed agents have been helping Kenyans to manage their tax affairs — especially, the filing of tax returns — to escape their tax obligations.

“Any person, who operates as a tax agent without being registered, fraudulently procures or attempts to procure registration as a tax agent…commits an offence and shall be liable, on conviction, to a fine not exceeding Sh200,000 or to imprisonment for a term not exceeding two years, or both,” the new regulations say.

It has emerged that the majority of the illegal tax agents have been using social media platforms such as Facebook to market themselves.

The Kenya Revenue Authority (KRA) has now moved in to clamp down on the unlicensed agents with the gazettement of the Tax Procedures (Tax Agents) Regulations 2018 that require the tax agents to be members of the Institute of Certified Public Accountants of Kenya (ICPAK) or practising advocates of the High Court of Kenya.

Former tax administrators with at least 10 years’ experience can also work as agents. All the agents must apply to the KRA for registration at a Sh20,000 fee.

The agents will be allowed to prepare and submit returns for their clients as well as act for them in tax correspondence with the KRA. Besides, the agents will be allowed to represent clients in tax matters coming before the tribunal.

The clamp down on illegal tax agents is part of wider measures the Treasury is using to streamline tax administration in Kenya as it moves to close the revenue performance deficit that has plagued the taxman in recent years.

With registration, the KRA will also find it easier to discipline rogue agents since they will also come under the oversight of professional bodies such as ICPAK and the Law Society of Kenya.
ICPAK and LSK are represented in the Tax Agents Committee that will investigate alleged misconduct by the agents.

Use of agents to meet tax obligations has been rising in tandem with the rise in number of taxpayers, who are filing returns.

READ: KRA to ease rules on filing returns from next year

By close of the fiscal year ended June 30, 2018, the KRA reported that more than 3.2 million Kenyans had filed their 2017 income tax returns, representing a 60 per cent increase from the two million who filed the previous fiscal year.

Every holder of a tax PIN is required by law to file annual tax returns and the taxman has effectively used the information to nab evaders.

The KRA has from this year also reconfigured its online tax filing platform dubbed iTax to ease identification of those filing nil returns to hide the income, while carrying out gainful economic activity.

Mr Rotich has in the meantime been pushing through tax administration reforms that increased the penalties for late payment. Interest on unpaid taxes has doubled to two per cent, besides a 20 per cent late payment penalty.

The penalty for late filing of tax returns is five per cent of tax due or Sh20,000, whichever is higher, having increased from Sh1,000 in 2015 to encourage higher compliance.