The National Treasury wants the Cabinet Secretary to have the final say on waiving hard-to-collect taxes in an amendment likely to put Treasury and Parliament on a collision course.
Treasury Secretary John Mbadi sought to amend the Tax Procedures Act by introducing a new section that would give him sweeping authority to determine whether or not to waive taxes.
In the rejected Finance Bill 2024, lawmakers struck down a Treasury proposal to give the Commissioner-General of the Kenya Revenue Authority the power to waive long-term debts.
Instead, lawmakers demanded that the Kenya Revenue Authority publish exemptions for taxes deemed uncollectible and seek parliamentary approval. The proposed law was abandoned following widespread protests.
“The Commissioner shall, where he determines that there is doubt or difficulty in the collection of tax, refer the case to the Cabinet Secretary for consideration and approval to exempt part or all of the tax due from a person,” says part of the Tax Procedures (Amendment) Act 2024.
The bill adds: “The Cabinet Minister may approve the exemption of part or all of the tax due from a person or direct the Commissioner in writing to take appropriate action.”
The Chairman of the Kenya Revenue Authority shall follow the directions issued by the Cabinet Secretary and shall not assess or recover unpaid taxes or liability in respect of the exemption granted.
The bill requires the Cabinet Secretary to publish a notice in the Official Gazette every four months listing the names of taxpayers whose debts have been waived, the reasons for the waiver, and the amount waived.
Although the National Assembly has 21 days to decide whether to approve or cancel the notification, cancelling the notification does not invalidate decisions previously made by the Cabinet Secretary, making the National Assembly’s role in tax relief largely formal.
MPs have rejected a proposal to give tax waiver powers to the Commissioner General of the Kenya Revenue Authority in a move that would prevent the creation of an all-powerful tax czar.
The Finance Bill 2024 initially proposed allowing the Kenya Revenue Authority chief, with the approval of the Treasury, to waive unpaid taxes due to difficulties in collecting them or the costly nature of prosecuting tax cheats.
An audit by the Auditor General of the Kenya Revenue Authority’s books for the financial year ending June 2023 showed a revenue debt of Sh542,192,103,181 (Sh542 billion) as at June 30, 2022. Of this, long-term doubtful and uncollectible balances amounted to Sh537,766,663,107 (Sh538 billion).
In March last year, the Supreme Court struck down income tax exemptions granted to Japanese workers and companies, saying the decision to grant the exemptions by former Treasury Secretary Okur Yatani in 2021 was unconstitutional because the Civil Service Commission did not have such powers.
Mr. Yatani issued an order exempting companies and employees’ profits from 15 projects worth Sh328 billion from income tax.
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