The banking sector wants Parliament to review a new law requiring firms in sectors with a high risk of under-declaring taxes to pay dues every five days.
The Kenya Bankers Association (KBA) told Parliament that the enactment of the Finance Act, of 2023 has created administrative challenges for commercial lenders who are required to compute Withholding Tax daily and remit the dues every five days.
The National Assembly’s Finance and National Planning committee chaired by Molo MP Kuria Kimani had in July amended the Excise Duty Act through the Finance Bill, 2023 to allow the taxman to impose a five-day deadline for remittance of excise duty on firms.
The law initially required that tax on excisable goods and services be paid on the 20th of the following month, except for goods from abroad whose taxes are remitted at the time of importation.
“I pay interest every single day and also accrue interest on a daily basis. The new law does not look at payment and accrual differently,” Kennedy Mutisya, the acting KBA Finance Officer, said.
“Before, I used to tell branches to tell me every month to process and remit the excise duty and I pay on the 20th day. Now I have to do it every single day to be able to pay and be compliant by the 5th day of collection of the taxes.”
The controversial Finance Act, of 2023 roped in commercial banks in the payment of taxes every five days.
The changes to the law require firms in sectors with a high risk of under-declaring taxes such as betting and gaming to pay dues daily.
Mr Wilfred Alambo, Equity Bank Group Tax Manager, said there is a certain administrative burden that is being transferred to commercial banks as they collect tax as agents of the KRA.
“For instance, we have to invest in new technology to replace human resources to facilitate the administrative issue of five days of remittance of taxes,” he said.
