Times Tower, the Kenya Revenue Authority's head office in Nairobi.
The Kenya Revenue Authority (KRA) is eyeing an additional Sh30 billion from the extension of the tax amnesty programme by a year from the initial deadline of June 2024.
Beneficiaries of the amnesty are spared from incurring penalties, interest and fines when they pay the principal tax, raising revenue that would otherwise go unpaid or locked in legal battles.
Businesses often dispute KRA’s tax demands, resulting in legal actions in courts and the Tax Appeals Tribunal.
Proceeds from the extension of the amnesty to June 2025 are expected to represent a substantive share of collections from fresh reforms covered by four new bills including the Tax Procedures (Amendment) Bill, 2024 and the Tax Laws (Amendment) Bill, 2024.
“We expect to raise about Sh30 billion from the extension of the tax amnesty,” said National Treasury Principal Secretary Chris Kiptoo.
Tax amnesty was initially introduced through the Finance Act, 2023 and was to run between September last year and June this before the extension.
The National Treasury said the proposed extension of the programme would allow more taxpayers to foot their bills without incurring penalties.
“This amendment will allow more taxpayers to fulfil their tax obligations without suffering interest and penalties,” the National Treasury said last week.
Individuals and businesses can face hefty penalties for defaulting on their tax obligations, prompting some to take advantage of the amnesty to settle their debt to the taxman.
More than half a million taxpayers benefitted from a cumulative Sh244.7 billion worth of waiver of penalties and interest, KRA said in April.
Some 2,617,111 taxpayers benefited from the first part of the amnesty programme which helped KRA net Sh43.9 billion in additional revenues.
The amnesty was however limited to tax laws under the Tax Procedures Act, 2015, meaning that custom duties administered under the East Africa Community Customs Management Act do not qualify.
The amnesty is also restricted to taxpayers charged with tax avoidance fines.
The National Treasury has backed the extension to deliver crucial revenues in the absence of the Finance Bill, 2024 which had targeted mobilising Sh334 billion.
KRA had a target to raise Sh50 billion from the initial eight-month window to June.
Small traders had pushed for extension of the deal during the Finance Bill, 2024 deliberations, noting the expanded window would encourage the self-disclosure of liabilities and boost revenue collections for the taxman.
The expiry of the programme would have seen taxpayers with outstanding balances accrue penalties and interest once more.
KRA had identified about 2.8 million taxpayers with penalties and interest and who qualified for the amnesty.
The extension of the programme is further expected to boost out-of-court settlements by allowing the taxman to settle long-standing tax disputes.
KRA previously ran a voluntary tax disclosure programme up to December 2023 allowing taxpayers to disclose tax liabilities in confidence and earn relief on penalties and interest.
The Treasury sees the use of tax amnesty as complementing other tax collections systems in place including enforcement actions which have become increasingly strict over the years.
