HIGHLIGHTS ON TAX AMNESTY PROGRAMME UNDER THE FINANCE ACT NO. 8 OF 2020

Overview

The Finance Act, 2020[1] proposed an amendment on the Tax Procedures Act of 2015[2] for the introduction of a tax amnesty programme which will run for three years starting 1st January 2021.[3] The Voluntary Tax Disclosure Programme is defined as a ‘programme where a person discloses the person’s tax liabilities to the Commissioner for the purpose of being granted relief of penalties and interest on the tax disclosed.’[4] The voluntary disclosure basically grants the tax payer certain immunity i.e. immunity from prosecution with respect to the tax liability disclosed.[5]

Scope of the Tax Amnesty

The scope of this amnesty programme affects all tax payers and covers income tax, value added tax and excise duty.

Objects of the Tax Amnesty Programme

To encourage tax compliance and increase the revenues to the government, the amnesty programme seeks to:-

  • Grant relief from penalties and interest on the tax disclosed up to 100% depending on when the tax is paid.
  • Immunity from prosecution in respect to the disclosure of tax liability
  • Have a payment plan agreement between the tax payer and commissioner for the tax liability for a period of one year.
  • In the event that the taxpayer is unable to fulfil the agreement of the payment plan, then the liability with full interest and penalties have to be remitted.
  • In the event of default, the taxpayer is not entitled to the right to appeal against the commissioner.
  • The commissioner has liberty to withdraw any relief granted, re-assess and collect balance of tax and even commence prosecution in case full disclosure was not done initially.

Analysis & Conclusion

This amnesty programme seeks to increase revenue collection and foster compliance among the tax payer. The programme is welcome though it has excluded persons who are under audit or is party to ongoing litigation. It would have been better if the above category of taxpayers are not excluded since it will hasten conclusion of tax matters and increase reve

[1] See, Finance Act No. 8 of 2020 Gazetted as Kenya Gazette Supplement No. 104 and assented into law on 30th June, 2020.

[2] Tax Procedures Act No. 29 of 2015.

[3] Tax Procedures Act No. 29 of 2015, Section 18 introduces a new section 37D to the Tax Procedures Act establishing the Voluntary Tax Disclosure Programme.

[4] Tax Procedures Act No. 29 of 2015, Section 18 (2).

[5] Tax Procedures Act No. 29 of 2015, Section 18 (4) (a).

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