Tax cheats granted 3-year grace period to declare correct taxes

Tax cheats have been granted a three-year grace period to disclose correct declarations and pay without facing any penalties, Treasury CS Ukur Yatani has announced.

In his Ksh. 2.7trillion budget presentation on Thursday, the CS proposed the introduction of a voluntary disclosure programme for tax cheats.

“Mr. Speaker, to enhance tax compliance, I propose to introduce a voluntary disclosure programme to allow Kenyans who, in the last five years may have inadvertently made omissions in their tax returns to voluntarily disclose such omission and pay the tax due.

“The programme will run for three years. In order to encourage uptake of this programme, I further propose to grant relief for penalties and interest in respect of the tax disclosed after payment of the principal tax,” he added.

The Kenya Revenue Authority, that has perennially missed its targets, has been seeking ways of leaking revenue leaks by tightening the noose on tax cheats.

President Uhuru Kenyatta assented to the Tax Laws (Amendment) Bill, 2020 on April 25, 2020 thus enabling the taxman to pay whistleblowers.

The Act amended Section 5A(2) of the Kenya Revenue Authority Act, 1995 by introducing a reward of Ksh. 500,000 for any person who provides information that leads to enforcement of tax laws.

A Deloitte report indicates that the reward is in addition to the following that are already in place:

1. A reward where the information provided leads to the identification of unassessed duties or taxes. The law stipulates a reward of KES 100,000 or 1% of the duties or taxes identified, whichever is less; and
2. A reward where the information provided leads to the recovery of unassessed duties or taxes. The law stipulates a reward of KES 2 million or 5% of the taxes or duties recovered, whichever is less,

“This move is expected to act as an incentive to whistle-blowers who will provide information leading to enforcement of tax laws. While these could lead to the revenue authority receiving more reports on likely cases of tax evasion, it may result into an increase in investigation type enquiries on taxpayers that may be unwarranted,” the Deloitte report adds.