Kenya Revenue Authority (KRA) has tabled a proposal in the Finance Bill 2019 to start barring CEOs and other top managers of tax-evading companies from flying out of the country.
Treasury Secretary Henry Rotich has proposed amendments to section 45 of the Tax Procedures Act, 2015, to include all "tax representatives" of an organisation, effectively expanding the list of company officials against who KRA can issue departure prohibition orders (DPO) until outstanding tax is paid in full or arrangements for payment are made.
A circular sent by the taxman to all its employees says the "tax representatives" of a company will include the CEO, managing director, company secretary, treasurer, trustee, resident director or similar officer of the company acting or purporting to act in such position.
“The proposed amendment enhances the effectiveness of the DPO -- It will ensure that tax representatives of companies whose controlling members are not resident in Kenya do not evade their responsibilities of ensuring that taxes from the companies are accounted for,” says KRA in the circular.
Mr. Rotich has also proposed a penalty of Sh2 million ($20,000) or two-year imprisonment or both as a general penalty for tax non-compliance.
Currently, KRA has powers to issue departure prohibition orders only when they have reasonable grounds to believe that a person may leave Kenya without paying tax due under their name or in a company in which they have a controlling stake.
Some high-ranking company officials who have been barred in the past from leaving the country by KRA include Motor dealer Foton East Africa’s managing Director Da Li and Libya Oil Kenya general manager Duncan Murashiki.
KRA is under immense pressure to meet its tax target and has in recent years been forced to raise taxes to cater for the ever-expanding national Budget as well as debt obligations. In the financial year running from July 2019 to June next year, the Treasury has set a target for KRA to collect Sh1.8 trillion in taxes to fund the Sh3.1 trillion Budget that was presented in Parliament mid this month.
If passed into law by Parliament, the new changes will expand KRA’s scope in going after officials of companies being investigated for tax evasion, increasing their success rate in tax recoveries.