Treasury Cabinet Secretary Njuguna Ndung'u on Tuesday, March 7, sought to clear the air on the state of tax reliefs and other related compensations.
In a circular sent to all relevant agencies, Professor Njuguna explained that all tax reliefs, including incentives, waivers and abandonments are policy measures used by the government to encourage economic activities and attract investments.
The CS stated that the initial approach was well-intentioned but the government needed to review some matters that arose during the process.
"While these tax reliefs can have some positive impacts on the economy, they can also have negative consequences through abuse of the process," he explained.
Broadly referred to as exemptions, the tax reliefs were designed to benefit the economy through individual taxpayers in the country.
"In this respect, we wish to clarify that suspension relating to abandonments and to any payments or disbursements in relation to refunds will be sustained until the process is clearly streamlined," Njuguna stated.
The Treasury CS, however, sought to allay the fear that the Kenya Kwanza Government was out to deny taxpayers what was rightfully theirs in terms of compensation.
He noted that the suspension does not mean that the refunds or abandonment has been scrapped and it is not a change in policy or the intent of the law.
"These administrative measures undertaken are aimed at ensuring that the operational aspects on implementation of the law are streamlined to avoid eroding the tax base or creating distortions in the economy and, therefore, achieve intended objectives of tax policy," noted Njuguna.
According to Njuguna, the government reviewed the terms of relief in order to establish a mechanism that will ensure fairness, equity and effectiveness in the implementation of the legal tax provisions.
At the same time, it was also noted that all other tax reliefs and incentives applications were clearly provided for in the law and will be reviewed in line with the existing laws.
President William Ruto on Thursday, February 16, 2023, announced plans to increase tax collection by Ksh274.1 billion in the current fiscal year.
