Concerns over ‘excess’ power Finance Bill 2024 gives KRA

Questions arise around the mandate the contentious Finance Bill 2024 grants the Kenya Revenue Authority (KRA).

The draft law sponsored by Molo MP Kimani Kuria seeks to amend a raft of legislations, among them the Income Tax Act (Cap.470), the Value Added Tax Act (Cap.476), the Excise Duty Act (Cap. 472), the Tax Procedures Act (Cap. 469B) and the Kenya Revenue Authority Act (Cap.469).

It has however sparked disquiet from lawyers, with the Law Society of Kenya (LSK) warning that some of its proposed amendments grant excessive power to the tax authority, hindering access to a fair hearing for taxpayers.

Such proposals include amending Section 51 of the Tax Procedures Act to give KRA the power to automatically disallow a taxpayer's objection if the taxpayer fails to provide the requested information within a specified period.

Per the bill, where a taxpayer fails to provide additional information required by the KRA after filing a notice of objection or fails to provide the information within the specified period, the objection shall be deemed disallowed.

KRA shall make the objection decision within 90 days from the date of receipt of a valid notice of objection.

But lawyers warn that the proposal if adopted will exert undue pressure on taxpayers to provide KRA with specified additional information under lodging a notice of objection.

An analysis by the law firm Bowmans indicates that the move is unfair because KRA could request documentation not maintained by a taxpayer.

“The taxpayer is then deemed not to have fulfilled its obligation of finding the additional information. In such a case, the taxpayer’s objection will be disallowed which would mean that the taxpayer will not have an opportunity to present its case at the Tax Appeals Tribunal and will be condemned unheard,” Bowmans warns.

The law firm further states that if the provision is read with the proposed amendment to Section 77 of the Tax Procedures Act to exclude weekends and public holidays from the calculation of time for tax matters, an objection decision could be delivered in 120 days.

Another issue of concern is the proposed removal of the prohibition on KRA from issuing agency notices when a taxpayer appeals to the Tax Appeals Tribunal or High Court.

Lawyers warn that if enacted, the proposal would allow the revenue authority to enforce tax collection of disputed taxes through agency notices even when a taxpayer has appealed against the tax in dispute.

“This situation could lead to injustices as taxpayers may be compelled to pay taxes under dispute without a fair resolution in the appeal process,” LSK President Faith Odhiambo told a press conference on Tuesday.

She said the proposal undermines the principle that no one should be condemned unheard, cautioning that it if passed, it may render the appeal process ineffective.

Taxpayers might also be at risk of incurring additional legal costs and time to seek court intervention to halt enforcement actions, the LSK president warned.

Bowmans' analysis calls the repealing of the provision permitting the tax body to issue an agency notice where a taxpayer has not appealed against an assessment “a clean-up exercise” because it is already covered under section 42 (14)(b) of the Tax Procedures Act.

The Act provides that an agency notice shall not be issued unless a taxpayer has not objected to or challenged the validity of the tax assessment.

At the same time, the 2024 Finance Bill proposes to amend the Data Protection Act.

It seeks to exempt the processing of personal data by KRA from the requirements under the Act if the disclosure is necessary for the assessment, enforcement, or collection of any tax or duty under a written tax law.

Lawyers however say giving KRA unlimited access to personal data without court orders or proper procedures will infringe upon taxpayers' rights to privacy and pose a risk of data misuse.

“We consider such a move unconstitutional and a violation of the rule of law,” Odhiambo said.

During the draft law’s public participation process which closed on June 10, over 600 stakeholders appeared before the National Assembly Finance Committee – which the bill’s sponsor Kuria chairs – to present their views.

Treasury seeks to raise Ksh.300 billion more through taxes in the bill, even though opinion polls show a large majority of Kenyans oppose it.

The lawyers' body has warned that it will move to court if the legislators fail to incorporate the views of Kenyans as Parliament considers the draft law this week.