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KRA maintains loud silence on tax amnesty plan as deadline looms

By Lee Mwiti | Published Tue, June 12th 2018 at 12:08, Updated June 12th 2018 at 12:26 GMT +3
Businessman holding money

In summary

  • KRA and Treasury have remained tight-lipped on success of programme that gives wealthy Kenyans a chance to repartriate their billions stashed abroad tax-free

Mystery shrouds a controversial tax amnesty initiative by the State that shields wealthy Kenyans who have stashed billions of shillings abroad even as the June 30 deadline looms large.

It guarantees them a blanket buffer to repatriate their money tax-free with no questions asked about its source, some of which could have been stolen from State coffers or through other illegal means.

ALSO READ: KRA must shed old ways to meet revenue targets

The amnesty, which was first introduced through an amendment to the Tax Procedures Act through the Finance Act 2016 with a December 31, 2017 deadline, was curiously extended by Treasury Cabinet Secretary Henry Rotich in his budget presentation last year.

This even as tax experts voiced their opposition, arguing that the amnesty legislation left a lot of room for manipulation.

They also argued that the blanket amnesty opened the floodgates to illicit cash inflows, with no clear benefit to the country.

“Taxpayers who will take up this amnesty shall have all principal taxes, interest and penalties for the income year, 2016 and the prior years automatically remitted in total. In addition, the Government will not follow up on the sources of such incomes and assets declared,” Mr Rotich said in his budget speech.

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But as the June 30 deadline beckons, the amount of money repatriated or the individuals who have taken advantage of the amnesty remains unknown.

When contacted, Kenya Revenue Authority (KRA) remained tight-lipped on whether the amnesty has borne the desired fruits or whether it was another hollow shepherd’s call that netted the country nothing while allowing illicit money to get in.

The clamour for the amnesty was powered by a protracted case between KRA and Zuku’s parent company Wananchi Group, with the taxman demanding Sh3.4 billion from Wananchi Group in unremitted taxes.

Overseas tax havens

ALSO READ: KRA must shed old ways if it’s to meet revenue targets

The tax demand related to Wananchi subsidiaries - Wananchi Group Holdings Ltd, Wananchi Programming Ltd and Wananchi Group Satellite Ltd - all registered in the tax haven of Mauritius but operating in Kenya. KRA wanted the companies to pay taxes in Kenya even if they were not registered here.

The case opened Treasury’s eyes to the billions that could be brought into the country if other Kenyan companies that were registered in overseas tax havens were enticed with an amnesty to bring their assets back into the country.

KRA Commissioner-General John Njiraini argued in a past interview that the tax amnesty was a timely development in light of Kenya having agreed to participate in the Common Reporting Standards (CRS) regime.

“CRS is a global initiative developed by the Organisation for Economic Co-operation and Development to enhance tax transparency and compliance across more than 47 countries, including tax havens such as British Virgin Islands, Mauritius and Jersey.,” he said.

“In essence, the Government aims to encourage compliance and tax transparency locally through the amnesty. The money that such an amnesty can attract into the country can go far in boosting its coffers,” said Mr Njiraini.

Though KRA has refused to shed light on the success or failure of the amnesty and whether Treasury will consider such a move again in the future, experts argue that if the taxman had implemented it well and given clear guidelines, the country could have benefited immensely.

Still unclear

ALSO READ: Why tax fraud rise worries experts

Tax audit firm Grant Thornton in an alert to its clients argued that subsequent to the enactment of the amnesty, its provisions and application were still unclear.

“This necessitated KRA to issue several guidelines and hold a meeting with stakeholders in a bid to demystify the set legal provisions and operationalise the tax amnesty provisions. While the amnesty provisions did not absolve taxpayers of any criminal liability, KRA has reiterated that the information declared under the amnesty will be maintained in confidence,” said the firm.

While KRA has kept the success, or lack of it, under wraps two years since the initiative’s inception, in Singapore a similar move announced in 2015 saw $10 billion (Sh1 trillion) repatriated into the country within four months.

Tax law expert Ken Mukiri argued that there could be more than meets the eye. “I think the reason the amnesty was put in place, and one which KRA wouldn’t want to say, is that the country was getting into an election year and a lot of money was needed by politicians for campaigns,” he said.

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