Tax experts want National Treasury Cabinet secretary Henry Rotich to iron out conflicts in tax laws through the Finance Bill 2016 to avoid confusing taxpayers and ease remittance.
The tax consultants have asked Rotich to address inconsistencies between the Tax Procedures Act 2015 and other taxation laws.
The legislation, whose intention was to simplify and harmonise taxation processes, deleted some sections in the Income Tax and Value Added Tax laws, creating confusion among taxpayers and the Kenya Revenue Authority.
KRA still demands that companies – which mainly supply to the government – continue deducting withholding tax, despite the same having been outlawed in the Tax Procedures Act 2015 which was enforced on January 19.
The law also deleted tax amnesty at a time when the KRA is implementing a waiver extended to landlords by Rotich in his last budget statement on condition they pay up outstanding taxes from financial year 2013/14.
“We think that was done inadvertently, that wasn't the intention,” PwC tax partner Job Kabochi said.
“As we stand now, that tax amnesty provision doesn't exist and that was a mistake that should be corrected.”
The tax agency has, however, continued to enforce the amnesty, whose deadline is next month, targeting 20,000 new landlords with potential revenues of Sh3 billion.
Targeted developers have, nonetheless, been elusive with only about 1,000 additional landlords having complied by end of March, the tax collector said on April 19, raking in about Sh130 million.
The PwC tax experts also expect overhaul of the Income Tax Act of 1973, marking the last stretch in the modernisation of the taxation regime which started in earnest in 2013.
The Income Tax Act – which has been amended severally – is expected to take care of new developments, including the regional integration through the six-nation East African Community and emergence of new sectors including the oil and gas.
The Value Added Tax Act was enforced in September 2013, while the Excise Duty Act was effected last December as the country moves to realign itself to global trend where consumption taxes form the lion's share of taxes collected.
“The global trend is moving towards VAT and excise as key driver of tax revenues unlike here in Kenya where there's heavy reliance on PAYE(Pay As You Earn),” Kabochi said. “We have seen great improvement in VAT and the next area is excise.”
The tax consultants urged taxman to continue strengthening its internal administrative systems to help it meet the Sh1.3 trillion target in revenue collections next financial year
which starts in July.
“In terms of increasing tax base especially around the corporate income tax, the quick wins will be around tax administration reforms,” PwC tax director Titus Mukora said. “With iTax, they are now starting to have a lot of data and what they ate looking at now is how they can utilise this data to identify instances of non-compliance and why certain people are filing returns which do not show tax payments.”
The ratio of corporation tax to gross domestic product in Kenya has remained lower than its EAC peers.