Treasury CS Prof. Njuguna Ndung’u, CBS stated in a press release on Tuesday that “suspension relating to abandonments and to any payments disbursements in relation to refunds will be sustained until the process is clearly streamlined.”
This is in response to a memo by Anthony Ng’ang’a, the Board Chairman of Kenya Revenue Authority, dispersed on February 28, 2023, which stated that suspended payment of tax reliefs by KRA has been undertaken in order to allow an audit and enhance tax relief processes and procedures.
In support of KRA’s Memo, the Treasury Cabinet Secretary explained that tax reliefs, despite being able to have positive impacts on the economy can have negative consequences through abuse of the process.
Read: KRA, Treasury Under Pressure Over Ksh.19 Billion Revenue Shortfall
A good example of this is the income tax waivers granted to Japanese workers and companies by former Treasury CS Ukur Yatani in 2021. Granted to 15 projects which had a value of Ksh. 328 billion, the measure was deemed unconstitutional with Justice Dennis Magare referring to it as “economic apartheid”.
This exemption led to tax inequality as Kenyan workers and companies had to pay income taxes while Japanese workers and companies operating in Kenya did not. It also caused a significant opportunity cost for the Government in the form of lost tax revenue.
Measures undertaken will ensure that the operational aspects of implementation of the law are streamlined. This, according to Prof. Ndung’u, will be useful in avoiding erosion of the tax base and creation of distortions in the economy while ensuring fairness in the implementation of the legal tax provisions.
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