Outcry as Kenyans face huge tax fines

Business Daily Kenya:  On Saturday the Kenya Revenue Authority lauded Kenyans for turning up in large numbers to file tax returns ahead of ...

Business Daily Kenya: 

A long queue at KRA Southern regional headquarters in Mombasa in a last minute move to file tax returns. Photo/BONFACE MSANGI

On Saturday the Kenya Revenue Authority lauded Kenyans for turning up in large numbers to file tax returns ahead of the closure on June 30. However, a number of people who have been visiting various Huduma Centres or iTax Support Centres across the country now stare at paying hefty fines after they realised their employers and organisations they trade with have not been remitting the tax they deduct from them.

According to KRA release on Saturday, by Thursday, a day ahead of the deadline for filing returns, over 2.1 million Kenyans had filed their returns. In the same period last year, only 1.1 million Kenyans had filed their tax returns.

But beneath the rosy numbers, some taxpayers are now up in arms after discovering that their employers, both in the public and private entities have not been remitting their tax, although the deductions are clearly reflected in their pay slips.

Equally, some businessmen, especially those who have been supplying companies and government agencies, were also shocked to discover that some of these entities have not been remitting the VAT they deduct before making payment for various goods supplied and services offered. Consequently, some people have incurred arrears of withholding tax in their accounts with KRA.

A local journalist who did not want his name mentioned said he was shocked when told that he owes KRA Sh36,000, arising from a 10 per cent withholding tax for a service he offered and was paid for but did not pay tax.

“I have been forced to file nil tax returns in the last two years to avoid the penalty as I try to sort out the issue with the company and KRA,” he said. Another taxpayer, who also requested anonymity, worked for four years for a private company before he lost his job. But when he went to file his returns he was informed by KRA staff at one of the Huduma centres that the company did not remit tax in 2014.

He was sacked in September 2014 after filing his returns. Since KRA had not introduced the online iTax system, in most companies, employees used to file returns on paper, which were then collected and dispatched to KRA. He expressed shock that last year when he went to file returns he was informed that he owes KRA some Sh270,000 because his employer then did not remit the tax for 2014.

“When I tried to show them proof on my pay slip that tax was actually deducted, I was told to follow up with the company and sort out the issue with them otherwise I will have to look for that money and pay,” he told People Daily.

“I don’t know what to do because I have tried to contact the company in vain. I did not file last year and I have been penalised Sh1,000. I don’t know why KRA is not taking up such cases because they are the ones who have the capacity to contact companies that fail to remit the tax,” he said.

A tax expert George Mwangi, a partner at GMK Accountants said there are so many taxpayers currently facing such cases, and unfortunately the onus of making follow-up with the employer falls on them and not the taxman.

He said KRA may not have the capacity to follow up all those cases because they are many. In cases where an employer deducts income tax but fails to remit, then the fault is on the employer, conceded Mwangi but added that it’s the employee who should discover that when filing and in case of default, make a follow -up. “This is also the same when a company supplies goods or offers a service to an entity which fails to deduct and remit VAT,” he said.

Mwangi said those affected can look for the money and pay to avoid penalties and accruing interests and then sue the defaulting employer or company. But Christopher Kirathe, the Executive Director Tax at Ernst & Young faults KRA for shifting the burden to the employee or supplier.

He said since the law requires the employer to deduct and remit income tax the consequences should fall on the employer for non-compliance, same as for VAT withheld by a company or State agency after supplying of goods and services.

“The employee or supplier only needs to prove to KRA that income or VAT tax was withheld,” Kirathe added. Efforts to contact KRA to find out where the obligation lies and the intensity of these incidences were fruitless.

KRA announced earlier in the year that individuals who would fail to file annual returns for 2016 by June 30 will face a fine of five per cent of the tax due or a maximum of Sh20,000. Previously, defaulters were penalised Sh1,000.

The post Outcry as Kenyans face huge tax fines appeared first on Mediamax Network Limited.

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