The de-listed individuals mainly comprise those who have pending Value Added Tax (VAT) obligations that could have arisen either from payments for private consultancies outside their workplace or directorships in personal companies that are not tax compliant.
The controversial plan by the tax authority, whose legal basis has been questioned, is intended to crack down on evaders.
Several employers Wednesday notified those affected to regularise their PIN accounts with KRA, failing which they would not receive their monthly pay.
Thousands of public and private sector employees could miss out on their September salaries after their Personal Identification Numbers (PINs) were de-activated by the taxman.
The de-listed individuals mainly comprise those who have pending Value Added Tax (VAT) obligations that could have arisen either from payments for private consultancies outside their workplace or directorships in personal companies that are not tax compliant.
The controversial plan by the tax authority, whose legal basis has been questioned, is intended to crack down on evaders.
Several employers Wednesday notified those affected to regularise their PIN accounts with KRA, failure to which they would not receive their monthly pay.
The monthly Pay As You Earn (PAYE) deductions can only be credited to active KRA accounts held on the iTax platform, making it impossible to disburse salaries of employees whose PINs are inactive.
“Please note that your KRA pin has been suspended and I therefore cannot file August 2017 pay as you earn (PAYE) tax in iTax,” said one such notice to an employee seen by the Business Daily.
The KRA move has elicited heated debate from tax experts and lawyers questioning its legal basis.
“If you deregister a person unfairly, you are likely to face legal consequences,” warned Deloitte East Africa Tax Leader Nikhil Hira.
KRA receives an average of 200,000 PIN opening requests every month. The taxman’s data shows that there are 10.6 million registered taxpayers, but only 5.8 million are on the online iTax platform.
Mr Hira spoke as several of those affected claimed they have no tax liabilities, raising questions on whether there were errors in the de-activations.
Mr Hira, citing several sections of the Tax Procedures Act on registration and deregistration of PINs, said it was unclear whether KRA had followed due process in effecting the drastic move.
Those affected by the suspension of their PINs are also effectively cut off from making critical transactions that require proof of active registration as a taxpayer, with serious consequences to their businesses.
The transactions that require proof of an active PIN certificate include registration of land titles, approval of development plans, registration, transfer and licensing of motor vehicles, and registration of business names and companies.
Others are underwriting of insurance policies, customs clearing and forwarding, payment of deposits for power connections, supplying goods and services to the State, as well as opening accounts with financial institutions.
KRA had earlier said the category of those affected would include taxpayers who are yet to migrate their PIN information to the iTax — KRA’s online tax payment portal and iTax- and compliant taxpayers who have not filed returns, or are submitting nil returns despite evidence of having steady incomes.
Section 14 of the Tax Procedures Act says in part a person issued with a PIN shall notify the commissioner in writing when that person no longer requires a PIN.
It adds the commissioner shall, by notice in writing, cancel the PIN of a person when satisfied that the person has been deregistered.
KRA can also deactivate a PIN that has been issued to the person under an identity that is not the person’s true identity or the person had been previously issued with a PIN that is still in force.
The commissioner may also at any time and in writing, cancel a PIN issued to a person and issue the person with a new PIN.
Lawyers had in the wake of an earlier notice by KRA argued that holding a tax PIN is the right of every citizen that cannot be taken away without following due process.
“KRA does not issue PINs to citizens as a favour but as provided for in law, in the same way the Department of Registration of Persons issues Identity Cards or Passports,” Nairobi lawyer Nashon Aluoka had said.
“It is an instrument that every adult needs to transact the business of life and meet their obligations as citizens and can only be taken away as provided for in law or through a court order,” he argued.
The KRA, Mr Aluoka said, has not made clear which law it will be relying on to take such punitive action that is likely to disrupt the lives of millions of Kenyans who may not even be owing any taxes.
Earlier on Tuesday, KRA said it had deactivated more than 95,000 accounts of Value Added Tax (VAT) defaulters.
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Note: The results are not exact but very close to the actual.
