Tax Compliance Alert: FKE Seeks Clarification on July 2024 Tax Payments
On July 31st, 2024, the Court of Appeal delivered a landmark judgment in the case of Nairobi C.A No. E003 of 2023 – The National Assembly and Another vs. Okiya Omutata and 55 Others. The ruling declared the Finance Act 2023 unconstitutional, a decision with significant implications for taxpayers across Kenya. As businesses and individuals grapple with the effects of this ruling, an urgent issue has emerged: how should taxpayers proceed with their July 2024 tax payments?
The Crux of the Issue
With the Finance Act 2023 now declared unconstitutional, the tax provisions it introduced are no longer legally enforceable from the date of the judgment. This means that taxpayers are unsure of the rates and guidelines they should follow when remitting their taxes for July 2024. The Kenya Revenue Authority (KRA) has yet to update its systems to reflect the Court of Appeal’s decision, leaving a critical gap in tax administration.
As of today, August 9th, 2024, taxpayers are expected to meet the deadline for their July tax remittances. However, the absence of clear guidance from KRA has placed them in a precarious position, as they risk penalties and interest charges for potential non-compliance, despite the situation being beyond their control.
The Federation of Kenya Employers (FKE) Steps In
Recognizing the urgency and potential repercussions of this situation, the Federation of Kenya Employers (FKE) has taken the initiative to address the issue head-on. In an open letter to KRA, FKE has requested immediate clarification on the following critical points:
Applicable Tax Rates: With the Finance Act 2023 nullified, what tax rates should be applied for July 2024 filings? Employers and taxpayers need explicit instructions to ensure compliance.
System Updates: When can taxpayers expect KRA’s systems to be configured to comply with the Court of Appeal’s judgment? The absence of updated systems is creating confusion and impeding the ability to file accurate returns.
Penalty Waivers: FKE is seeking assurance that no penalties or interest will be imposed on taxpayers who are unable to comply with the current tax filing requirements due to the lack of system updates.
The Impact on Employers and Taxpayers
The uncertainty surrounding July 2024 tax payments is more than just an administrative inconvenience; it has real financial implications for businesses and individuals alike. Employers, in particular, are concerned about the potential for punitive measures if they are unable to remit taxes correctly and on time. This could lead to unnecessary financial strain on businesses that are already navigating a complex economic environment.
For employees and other individual taxpayers, the lack of clarity could result in overpayments, underpayments, or delays in tax filings, all of which could have long-term financial consequences.
The Way Forward
In light of these developments, it is imperative that KRA responds swiftly to the concerns raised by FKE and the broader taxpayer community. Clear, actionable guidance on how to handle July 2024 tax payments is essential to prevent unnecessary penalties and to ensure that taxpayers can meet their obligations in compliance with the law.
As the deadline looms, the need for transparency and prompt action cannot be overstated. The Federation of Kenya Employers is committed to advocating on behalf of its members and all taxpayers in Kenya, ensuring that their rights and obligations are clearly defined and respected in the wake of this significant judicial ruling.
