Legal & Tax Alert: Overview Of The Tax Procedures (amendment) Bill 2024

Introduction 

The taxation landscape in Kenya has seen significant changes as the government seeks to streamline revenue collection whilst also catering to the ever-changing needs of the economy. As such, the Tax Procedures (Amendment) Bill 2024 (hereinafter “the Bill”) seeks to make pivotal changes to the tax procedures regime that will have impact on the business environment and individual taxpayers.  

The following feature the proposed amendments and potential impacts:

1. Extension of the Amnesty Programme 

The Bill proposes to Amend Section 37E of the Tax Procedures Act (TPA) to extend the amnesty period to 31st June 2025. 

Implication  

The tax amnesty programme netted Sh43.9 billion against the targeted Sh51.0 billion, translating to an 86.08 percent performance rate, which has been in effect from September 2023, aligning with the broader goal of improving tax compliance and boosting revenue collection. 

Notably, the amnesty only applies to tax periods up to 2022. An extension that includes the 2023 tax period would have provided additional relief and benefits to taxpayers. However, the extension until mid-2025 is still a positive development, particularly considering that many taxpayers did not fully benefit from the initial amnesty period. This delay in taking advantage of the scheme was partly due to the slow configuration of the iTax system, which initially struggled to support the amnesty application process. Even after the system was updated, users encountered several challenges in submitting their application

2. Relief in cases of doubt or difficulty in recovering tax. 

The Bill proposes to introduce Section 37E to the TPA which will apply where the Commissioner determines that: 

• It may be impossible to recover an unpaid tax, 
• There is undue difficulty and expense in the recovery of unpaid tax, or 
• There is any other reason occasioning inability to recover the unpaid tax. 

In these cases, the Commissioner may refer the case to the Cabinet Secretary for consideration and approval for relief of part or the whole of the tax due from a person. 

Implication   

Currently, the law imposes strict constraints on the abandonment of tax liabilities. Article 210 of the Constitution mandates that no tax or license may be imposed, waived, or varied except as provided by law. This constitutional provision enforces the principle of legality in taxation, ensuring that any alterations to tax obligations, including the remission or abandonment of taxes, must be executed through formal legislative processes. 

The introduction of Section 37E to the TPA would create a formal mechanism for addressing cases where the recovery of unpaid taxes becomes unfeasible or excessively burdensome. By allowing the Commissioner to refer such cases to the Cabinet Secretary, the proposed amendment aims to provide a structured approach to tax relief, ensuring that tax remission is granted under defined conditions and with appropriate oversight. 

This new provision seeks to balance the need for effective tax collection with practical considerations regarding the recovery of debts. It aligns with constitutional requirements by ensuring that any remission of tax obligations is sanctioned by law and subjected to review and approval, thereby upholding the rule of law while addressing practical challenges in tax enforcement.

3. Exclusion of weekends and public holidays from the period of lodging objection notices and receiving of the Objection Decision  

In computing the period for lodgment of objections to the Commissioner under Section 51,52,53, and 54, the Bill aims to amend Section 77 towards streamlining the timeframe where it undertakes clarification of computation of days to exclude Saturday, Sunday and public holidays. 

Implication  

The exclusion of weekends and public holidays from the 30 and 60-day periods for lodging objections and receiving decisions means that taxpayers will effectively have more working days to complete these processes. This change acknowledges that neither taxpayers nor the Kenya Revenue Authority (KRA) are expected to handle tax objections on non-working days, thereby providing a more practical and fairer timeframe for compliance. 

Conclusion 

The Bill seeks to introduce amendments that would greatly impact the economy by influencing government and taxpayer operations. While some of the amendments, particularly relief on difficult-to-recover taxes, are exposed to potential misuse, transparency will be crucial for maintaining public trust and confidence in the tax system. 

CM Advocates will continue to monitor the progress of the Bill and keep our clients appraised on potential changes and implications it may present.