FINANCE
Voluntary tax disclosure programme ( VTDP ) or tax amnesty
By CPA Peter Kinuthia
According to an IMF publication of 2018 on raising revenue , a typical developing economy collects around 15 percent of GDP in taxes , compared with the 40 percent collected by a typical advanced economy . In view of the fact that the ability to mobilize resources by way of collecting taxes is central to a country ’ s capacity to finance the provision of social services such as health , security , education and critical infrastructure including electricity , dams , rails and roads . This low level of tax collection negatively impacts , stunts and puts economic development at risk
Regardless of the constraints they face , countries must strengthen their capacity to collect tax revenue by pursuing reform strategies with certain distinct features . The policymakers should tackle this challenge through a broader tax base , stricter enforcement for better and enhanced tax compliance .
On their part , the Kenya Revenue Authority ( KRA ), has not lagged behind on this and has endeavored to bring more persons into the tax net and become more tax compliant not only through stricter enforcement and but also through persuasion .
One of the persuasive tool that KRA has recently introduced and put in place is the Voluntary Tax Disclosure Programme ( VTDP ) or tax amnesty . Below are some of the frequently asked questions ( FAQS ) about this program .
What is Voluntary Tax Disclosure Programme ( VTDP )
This is a program anchored in the provisions of the Tax Procedures Act as amended through the Finance Act of 2020 . It allows taxpayers to voluntarily disclose any tax liabilities which were previously undisclosed to the Commissioner for the purposes of tax compliance and be granted relief on penalties and interest on the tax disclosed .
What is the effective period ?
The effective period is the open window within which a Taxpayer should lodge the application for consideration by the Commissioner . VTDP is running for a three year period beginning 1 st January 2021 and ending on 31 December 2023 .
Which periods are covered ?
This is the period for which a Taxpayer should disclose hitherto undeclared taxes . It is a five year period starting on 1st July 2015 to 30th June 2020 .
What taxes are liable ? The following taxes are covered : individual income tax , corporate income , employee taxes ( PAYE ), withholding income tax , capital gains tax , Value Added Tax ( VAT ), withholding VAT , excise tax , turnover tax and monthly rental income tax .
Who qualifies for the VTDP ?
The VTDP is available to all taxpayers who may have undeclared taxable liability in Kenya . However , the following persons are exempted from the program : where a tax payer is under audit or investigation for the undisclosed tax , or has been served with a notice of intention to investigate or carry out an audit / compliance check for the undisclosed tax ; or where a taxpayer is a party to an ongoing litigation in respect to the tax liability or any matter relating to the tax liability .
How does a taxpayer apply for VTDP ?
The beginning point is to self-assess and quantify undisclosed tax liabilities , if any . This is by way of carrying out a tax health check on all the relevant tax heads by a qualified and an experienced tax expert .
Thereafter , lodge the application through the iTax portal . The applicant shall receive an acknowledgement slip via registered email address . Upon approval / rejection of the application , the applicant will receive approval / rejection notice via their registered email address . For approved cases , the taxpayer shall generate a payment slip ( PRN ) as per the filed VTDP return and make the payments accordingly . A VTDP certificate will be issued to the applicant upon full payment of the disclosed taxes .
What are the benefits of the program ?
As a start , it provides an avenue for taxpayers with previously undisclosed taxes to declare the same and pay principal tax thereof without imposition of punitive penalties and interest . The relief of the interest and penalty due on the tax disclosed is as follows : 100 % remission where the disclosure is made and tax liability paid in the first year of the programme ; 50 % remission where the disclosure is made and tax liability paid in the second year of the programme ; 25 % remission where the disclosure is made and tax liability paid in the third year of the programme .
Further , there is no prosecution for tax liabilities disclosed under the programme . The taxpayer shall not be prosecuted with respect to tax liability disclosed under this programme . This provides protection against gross or wilful neglect , fraud or evasion which may have happened in the past .
However , where the applicant fails to disclose the material facts in respect of the relief granted , the
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