June 1, 2023


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Ukur Yatani’s Tax Dispute Cash Deposit Plan Stirs Storm

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Tax experts have faulted a proposal by the Nationwide Treasury that firms and men and women combating Kenya Earnings Authority (KRA) in court more than tax needs, deposit 50 % of the disputed amount of money in a Central Bank of Kenya account indicating it will hurt business enterprise.

Treasury Cabinet Secretary Ukur Yatani though offering the 2022/23 budget on Thursday proposed amendments to the Tax Tribunals Act, 2013, to call for that any organization involved in a row with the authority, should deposit 50 per cent of the quantity KRA statements to be owed right before proceeding to attraction, should KRA earn at the Tax Appeals Tribunal.

Mr Yatani explained the transfer was meant to secure the disputed tax income. “We have pointed out that tax disputes acquire as well long to conclude, primarily following judgement by the Tax Appeals Tribunal. In purchase to shield the disputed tax income, I propose to amend the Tax Appeals Tribunal Act, 2013 to demand a deposit of 50 percent of the disputed tax earnings in a unique account at the Central Bank of Kenya when the Tribunal can make a ruling in favour of the Commissioner-Typical KRA as the taxpayer proceeds to attraction the conclusion,” the CS stated.

50 p.c deposit

In the proposal, he explained, need to the taxpayer get the charm in court, the dollars should really be refunded inside 30 days.

“I have also proposed that in circumstance the taxpayer gets judgment in his or her favour on final willpower of the make a difference, the 50 % deposit shall be refunded to the taxpayer in 30 days immediately after the ultimate determination of the matter by the Courts,” he claimed.

The proposal has, however, attracted sharp criticism from tax authorities, who argue that it challenges killing little corporations without enough fiscal muscle mass.

They also see the transfer as a single that will h2o down initiatives in the direction of ease of doing company in the state, drive firms to shut down, and fire employees, consequently repelling investments.

“The introduction of the requirement to deposit 50 % of the disputed tax quantity where a taxpayer intends to attraction an unfavourable ruling delivered by the Tax Appeals Tribunal is a retrogressive proposal from an simplicity of undertaking company in Kenya, especially given the time it usually takes to conclusively decide matters via courts,” Solomon Kihanga, a tax supervisor with KPMG claimed.

Tax Appeals Tribunal

The pro also cast uncertainties on the independence of the Tax Appeals Tribunal, which they say has in the previous handed KRA favourable judgments in about 60 p.c of the conditions it handles, regardless of most of them being overturned by the courts on charm.

“How can you be expected to shell out for one thing that has not been verified? This proposal is going to damage corporations in a significant way considering the fact that their dollars flows will be eroded, functions will be affected and work opportunities will be missing,” explained Mr Erick Nondi, a tax advisor in Nairobi.

Mr Nondi argued that compact businesses in unique face the risk of closing down considering the fact that they will have substantially much less muscle to appeal tribunal judgments, lots of of which would be overturned by courts.

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