Kenya’s tax system is based on tax declaration, more often taxpayers do not disclose either by design or omission of their income sources forcing stringent follow-ups by the Kenya Revenue Authority (KRA). This has over time been the tussle between the taxman and the citizenry even resulting in arrests and imprisonment.
Kenyans will now be forced to comply with KRA upon a directive to produce tax records or a necessity to inspect taxpayers’ goods and information on their tax liability. This follows a court verdict that empowers the taxman in administering tax law after a petition challenging the constitutionality of its investigation and enforcement powers was filed in 2017.
KRA’s quest to follow up on taxpayers to the book has caused an uproar among Kenyans for some time now. Sharing of personal details by financial institutions and accessibility of purchase and business records has been termed invasive and unlawful, but going with the latest development, the exercise is fully supported by law.
According to the petitioner, allegations against KRA were a breach of the constitutional rights to privacy, the right to self-incriminate and the right to fair administrative action. Sections 57,58, 59 and 99 of the Tax Procedures Act empower KRA to inspect taxpayers’ goods and records as well as direct the taxpayers to produce records and information on their tax liability. Section 57, in particular, allows the information received by KRA to be admissible in civil and criminal cases.
Tax Law Verdict
While opposing the petition, KRA demonstrated that the powers were necessary for the Authority’s Investigation and Enforcement Department to obtain all essential information and take necessary actions to make a fair decision on the tax liability of taxpayers. In dismissing the petition, Justice Korir found that the right to privacy can be limited within the law and in the public interest and privilege not to incriminate oneself cannot be used to get away with a crime.
The High Court observed that the said provisions of the law are only meant to enforce the tax laws after a taxpayer fails to self-assess for tax purposes or once it is evident that a taxpayer is dishonest. The court also noted that the Tax Procedures Act has safeguards that ensure taxpayers receive fair administrative action from the tax collector whenever the need arises to put a particular taxpayer through the administrative process.
Justice Korir also stated that it is upon the taxpayers to do their part in properly complying with the law to not raise the suspicion of KRA, which has the mandate to re-engagee with them on the accuracy of their tax compliance. The Court, however, observed that if KRA acts arbitrarily while exercising those powers, any person aggrieved has recourse to the courts.