Senators now want the Kenya Revenue Authority (KRA) to stop imposing hefty penalties on counties for late remittance of statutory deductions until delays in disbursement of equitable share is sorted out.
The lawmakers argue that the fines continue to add to pending bills burden that county governments are grappling with, yet remittance of deductions are tied to prompt release from the Exchequer.
Nairobi Senator Edwin Sifuna, while leading the push, said delays by the National Treasury to release funds to the devolved units has resulted in counties failing to pay staff salaries on time, hence delays in non-remittance of statutory deductions.
He decried that the taxman has often gone ahead to slap counties with huge fines for late remittance of their employees’ income taxes.
The senator added that the penalties include fines and accrued interest, an expense that will ultimately be borne by citizens.
“Why penalise counties for non-remittance of PAYE yet it is the Treasury that delays in disbursement of equitable share that goes to payment of salaries where the statutory deductions are derived from?” Mr Sifuna posed. “If they delay paying, then they are told that they will pay with interest. Where do you want the money to come from?”
Mid-last month, the Council of Governors chairperson Anne Waiguru complained that KRA continues to impose penalties due to late payment of taxes occasioned by the delays, further constraining county resources.
The Kirinyaga governor said the taxman has been issuing agency notices and/or attaching county governments’ bank accounts without consideration of the status of disbursement.
“As a result of the delayed funding, counties continue facing many challenges which include non-compliance with regards to timely payment of employees’ salaries and remittance of statutory deductions,” said Ms Waiguru.
Currently, the Treasury has failed to disburse a total of Sh94.35 billion to counties in equitable share for the months of February (Sh31.45 billion), Sh29.6 billion for March and Sh33.3 billion for April.
The law states that disbursements to county governments should be remitted by 15th of each month yet the Treasury has not been adhering to the set timeline.
Nonetheless, county governments are required to remit deductible income taxes, commonly known as Pay As You Earn (PAYE), and withholding tax by the ninth day of the following month.
In 2021, the Directorate of Criminal Investigations (DCI) summoned then-Nairobi governor Ann Kananu and other county Finance officials over tax avoidance.
In 2018, some 17 counties were slapped with huge fines for late remittance of their employees’ income taxes, with KRA demanding Sh216 million from the devolved units.
Elgeyo-Marakwet Senator William Kisang’ also questioned how KRA wants counties to settle the dues to escape the hefty fines yet they are not receiving funds from the national government.
“The problem is not the counties but it is because of the delayed disbursements,” said Mr Kisang’.
However, KRA, through Commissioner for Legal Services Paul Matuku, said they have since gone slow on issuing notices to counties.
He said the Head of Public Service Felix Koskei, through a letter, had asked them to go slow on the same.
