The ongoing tax amnesty that was set to expire this Sunday has been extended to March 31, 2025 as part of new changes to the Finance Bill that seeks to drive compliance and lift state revenues
The extension of the amnesty represents yet another U-turn by MPs who had previously rejected the plea of small traders to extend the tax pardon by a year with the goal of realising more revenues of the taxman.
The amnesty, which sought to waive penalties and interest on unpaid tax, is a relief to persons and businesses that were wary of the pardon’s deadline date on June 30.
The Kenya Revenue Authority (KRA) has collected Sh20.8 billion through the amnesty scheme between September and April out of the Sh50 billion it was targeting in the current fiscal year.
“By extending the amnesty, it allows Kenyans who had an outstanding payment to earn reprieve from penalties and interest. This marks a big relief for Kenyans who were worried about the expiry,” said Kuria Kimani, the chair of the Finance and National Planning Committee.
“When the Finance Act of 2023 introduced the tax amnesty, 1,058,734 Kenyans applied with a principal tax of Sh42 billion. So far, Sh31.2 billion has been paid by the taxpayers while a balance of Sh10.7 billion remains.”
The 2023 Finance Act had introduced the pardon where the KRA Commissioner was barred from recovering penalties, interest and fines on a tax debt where a taxpayer had paid the full principal tax before 31 December 2022.
Where the principal tax had not been paid before the date, a taxpayer was allowed to apply for the amnesty for interest and penalties accrued to December 31, 2022 but was required to propose a payment plan for the outstanding amount.
Taxpayers liable for the tax avoidance penalty do not qualify for the amnesty.
Without the extension of the pardon, taxpayers with outstanding principal tax would have seen penalties and interest accruing once again, handing down fresh pain.
The amnesty was expected to incentivise out-of-court settlement of tax disputes where principal taxes are agreed upon and settled within the life of the reprieve window.
Last year, President William Ruto noted that the waiver was intended at alleviating financial burdens by assisting taxpayers facing financial challenges relating to unpaid taxes.
Earlier, the taxman had identified 2.8 million taxpayers with penalties and interest and who qualified for the programme. Last week, small traders and lobbies pushed for an extension of the pardon as well as the prolonging of the period to clear principal tax sums.
“With the increased collections witnessed by KRA and the previous voluntary tax disclosure program, extending the current amnesty may boost revenue collection by encouraging self-disclosure of liabilities by taxpayers,” the Kamukunji Community Empowerment Centre said in submissions to the Finance Committee.
Collections from the amnesty programme have been paramount in growing revenues for KRA even as the taxman remains under pressure to meet an increased target.
KRA is expected to mobilise Sh2.45 trillion in the financial year ending on June 30 down from Sh2.04 trillion in actual nettings in the year ended June 2023.
The taxman has a higher target of mobilising Sh2.91 trillion in the fiscal year starting July 1.
