Law firm wants caps on interest payable to the taxman

Stakeholders want the Tax Procedure Bill, 2015 amended to compel the Kenya Revenue Authority to observe the in duplum rule when calculating interest payable by taxpayers.

The rule provides that interest ceases to accrue once the sum of the unpaid interest equals the amount of capital outstanding.

Anjawalla and Khanna aocates told the House Finance, Planning and Trade committee to amend clause 38 of the Bill to ensure interest does not exceed the principal tax. They were making submissions to the committee chaired by Ainamoi MP Benjamin Lang’at during the stakeholder scrutiny of the Bill.

The committee tabled its report on the Bill that Treasury is banking on to help harmonise rules applicable to the administration of tax in Kenya.

The Bill, awaiting committee scrutiny after MPs concluded debate, further seeks to address issues ranging from powers and functions of the KRA commissioner-general to making of tax returns.

It combines all tax procedures into a single tax law. The Bill provides a better link between the commissioner and taxpayers in case of disputes in that the commissioner is required to notify taxpayers in writing in cases of a dispute.

READ: Experts wary of sweeping KRA powers in new tax Bill

Prohibition order

The proposed law enables the commissioner to issue a prohibition order (including passport, visa or identity card retention) preventing a taxpayer from leaving the country until such a time that the tax due is paid or substantial arrangements to pay have been made.

“The Bill also sets the jurisdiction to try cases in case a person found to have contravened the tax law is prosecuted in any place in Kenya…,” the document reads. The Bill gives an authorised KRA officer the power to prosecute on behalf of the commissioner, under the direction of the Director of Public Prosecutions. Such an officer will have the power of a public prosecutor.

The MPs found out from stakeholders — who included Kenya Association of Manufactures the, Institute of Certified Public Accountants of Kenya, and PricewaterhouseCoopers — that the proposed law falls short in certain areas.

The committee also listened to submissions of officers from the Treasury. PWC proposed reduction of penalties on oil and gas companies which have been granted exploration licences.

“The penalty for failure to register or deregister for taxes is punitive (Sh100,000 to Sh1 million per month). We propose that the penalty for individuals should be reduced to a reasonable amount of Sh10,000. A punitive penalty regime is counterproductive,” the auditors said.