Suspension of Tax relief payments in Kenya

The Kenya Revenue Authority (KRA) has recently suspended all tax relief payments in Kenya, a move effective from 28 February 2023. Tax reliefs are provided to give a boost to investment levels in an economy. Tax reliefs also lead to the generation of vast employment opportunities in a country. The authority had granted an average of 122 billion shillings annually as tax relief in Kenya. So, the total amount spent on tax relief comes out to be 610 billion shillings in the past five years. As per the Kenyan official statistics, there was a surge in tax expenditures in the financial year 2020-2021 to 316 billion shillings. This happened despite the enthusiastic efforts by the National Treasury of Kenya to turn down non-important waivers. The move of such suspension is a collective decision by the KRA and National Treasury and Economic Planning. 

WHAT PROMPTED KRA TO SUSPEND TAX RELIEFS?

 To understand what prompted the taxman in Kenya to take such measures, the reasons asserted by Anthony Mwaura, the chairperson of the Board of Directors of KRA must be considered. He explains that tax relief measures and policies are being reviewed and the aim is to give a push to the pace of economic growth in Kenya by stimulating the impact of tax expenditure. He has assured the taxpayers that all the laws shall be complied with while processing the present tax relief regime. The important point to note here is that the suspension is temporary and payments shall be withheld by the KRA until the reviewing and restructuring process becomes complete. 

The KRA has expressed its intention to effectively audit and accelerate the processes related to tax relief payments inclusive of abandonments, waivers, exemptions, and tax refunds. Anthony Mwaura has explained that tax expenditure shall be minimized and practices at par with international standards shall be implemented for better generation of revenue. Such a step by KRA is a part of the government’s strategy to put a noose around revenue leakages. This in turn will assist in the better mobilization of taxes, thereby accelerating Kenya’s economic growth. Kenya is strategizing to use increased revenue collection towards the financing of programmes relating to growth in the country.

APPREHENSION OF BUSINESSES AND OTHERS

Many businesses apprehend adverse impacts on their cash flows. These businesses apprehend that their liquidity would be hit as they relied on tax payment reliefs to meet their working capital requirements. Employees too apprehend that their pockets would be impacted as earlier they were granted tax refunds when their employer failed to grant life insurance policies or education expenses. Tax refunds were given in cases of mortgage of an owner-occupied property as well. The KRA, though claimed that the suspension of tax relief payments stems from the taxpayers’ concerns only who want rules and procedures relating to tax exemptions to be revised.

When a country takes up the task of restructuring its tax regime, certain ripples are meant to be created till the process is properly streamlined. The KRA assures that it will work in tandem with taxpayers to redress all prevailing issues to further the objective of ease of tax compliance. The authority terms its move of such suspension as the adoption of the BETA model, which is an acronym for Bottom-up Transformation Agenda. In an official press release by the KRA, it has expressed optimism that once there is an enhancement of tax relief policy, it will ensure equitable provision of tax reliefs and tax exemptions. The authority has ensured its commitment to offering the best customer services to the taxpayers of Kenya. It will be worth observing how Kenya revamps its tax regime and brings it to the level of international standards. 

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