Kenya’s treasury faulted for tax amnesty law inaction

Treasury’s delay in creating guidelines for tax amnesty on cash stashed abroad is denying the country revenue, experts have said.

Consultancy firm PriceWaterhouseCoopers (PWC) said yesterday that Treasury Cabinet Secretary Henry Rotich’s failure to come up with the rules had prevented them from filling tax returns.

The CS, in his 2016/17 budget statement, declared a tax amnesty allowing wealthy Kenyans with incomes or assets offshore to declare such assets to KRA and in return they would have all principal taxes, interest and penalties for the income year 2016 and the prior years automatically waived.

In addition, the Government promised not to follow up on the sources of such incomes and assets once declared.

Mr Rotich formalised the amnesty in the Finance Act 2016, through an amendment in the Tax Procedure Act. The deadline for the Amnesty is December 31 this year.

Map tax evaders

But as Treasury gears up for the 2017/18 budget, experts say inaction on the matter a year on was nothing short of baffling.

“It is surprising that a whole year after granting the amnesty, the CS has not even come up with a form with details on how those who want to file the returns can go about it as per the regulations of the amnesty. We, therefore, don’t think that anybody has taken advantage of the amnesty, which means loss of money for KRA,” PWC Associate Director Gareth Harrison said yesterday.

“We hope in this year’s budget, the CS will give the guidelines, given that it’s a few months before the amnesty expires on December 31,” Mr Harrison said.

Harrison said taxpayers targeted by the amnesty did not know how much information they should or should not disclose, making them ignore it altogether.

Rajesh Shah, a partner at PWC, said attracting offshore taxes is not the only reason that Treasury should ensure taxpayers take advantage of the amnesty.

“I think the most important benefit, especially for KRA is being able to map tax evaders. For example, when a similar amnesty was announced for rental income, KRA was able to map landlords and enforce taxation on them. If the amnesty works, KRA will be able to map tax-cheats across the globe,” said Mr Shah.

The amnesty debate comes at a time when Kenya has just signed the Common Reporting Standards (CRS) agreement, which is an initiative developed by the Organisation for Economic Co-operation and Development (OECD), requiring members to share tax-related information among each other.

The agreement has been signed by 47 countries including tax havens such as British Virgin Islands, Mauritius and Jersey. It intends to enhance tax transparency and nab tax-cheats.