The Kenya Revenue Authority (KRA) is in the process of overhauling the entire income tax regime so as to make it simpler for taxpayers to comply and also harmonise with the other East African Community partner states.
KRA deputy commissioner for policy James Ojee says the country’s income tax regime has been amended several times which has affected its clarity and made it complicated for taxpayers and is now set for overhaul to improve revenue collection and ease compliance.
“We will, among others, be re-looking at the tax incentive regime and harmonise it with that of our partner states in the EAC,” he said. “We will also examine how the tax incentives have affected the economic growth of our country and then come up with laws which will improve revenue collection and make it easier for the taxpayers,” he added.
Ojee further said the current Act has too many schedules, which makes it difficult for the taxpayer to know the relevant section of the law to apply for easier compliance.
“For example, is you are an insurance company whose main stream of income comes from interest or dividends, then that is a stream that should be taxed at a different rate as opposed to an individual investor.
That difference in tax rate gives room for tax planning and classification,” he said. The Finance Bill, 2016 has allowed KRA to give amnesty on income earned outside Kenya in 2016 provided that the returns are submitted by December 2017, he added. “The penalties for the years of income from 2016 and prior will be waived in full.
This will take effect as from January 1, 2017. This amendment is aimed at increasing the tax base and will also attract foreign investments to the country,” said the deputy commissioner.
The Bill also grants the KRA commissioner-general powers to call for the records and returns of taxpayers from third parties. This amendment took effect from July 1. “The commissioner can now give legal notice when he intends to request for information from third parties,” said Ojee.