Kenya: Govt Plan for 50% Tax Appeal Deposit Will Trigger Crisis – Experts

Nairobi — Accountants under the Institute of Certified Public Accountants of Kenya (ICPAK) have termed as unfair the proposal by the National Treasury to require taxpayers to pay half of the disputed tax before an appeal, saying it would trigger cash flow crisis for many entities embroiled in disputes with the Kenya Revenue Authority.

While presenting the 2022/23 budget, Treasury Cabinet Secretary Ukur Yatani proposed the amendment of the Tax Appeals Tribunal Act, 2013, a move he said is aimed at encouraging out-of-court settlements amid increased suits that have deterred KRA to collect billions in dispute.

But the Institute, during a media briefing held on Tuesday, said that if approved, the law will have far-reaching consequences on taxpayers and especially on their cashflows and deter foreign direct investment into the country.

“The proposal impedes the taxpayer’s rights of access to justice and fair administration. The Institute is of the view that the requirement to pay 50 percent of the amount in dispute violates Article 48 and impedes taxpayers’ access to justice,” ICPAK chairperson George Mokua said.

In addition, he remained wary of a delay in repayment of tax refunds which he said will compound cash flow challenges for taxpayers and could possibly lead to business shutdown.

” Informed by previous and existing delays in repayment of tax refunds, there is a real concern from taxpayers that it will be difficult for the taxpayer to access the refund within the stipulated timeline of 30 days,” he explained.

ICPAK noted that many taxpayers may be forced to opt for the Alternative Dispute Resolution (ADR) framework even for cases that may be better resolved by the courts.

Alternatively, the group urged KRA to similarly deposit 50 percent of refunds due to taxpayers where KRA appeals a Tribunal decision in favor of the taxpayer.

“We also note that the requirement to pay a 50 percent deposit only applies to taxpayers and not to KRA. In any dispute, there are at least two parties and the requirement for a deposit should apply to all parties equally,” ICPAK pointed out.

In its proposals, the institute wants the High Court and Court of Appeal to continue addressing the issue on a case-by-case basis even as it proposed the creation of a dedicated division of the High Court to deal with tax matters.