3 Million Kenyans Have 72 Hours to File Tax Returns

As of June 26, approximately six million Kenyans had successfully filed their tax returns representing a 20% increase compared to the same period in the previous year.

However, around three million taxpayers have yet to submit their returns, leaving them exposed to potential penalties from the Kenya Revenue Authority (KRA). In Kenya, the deadline for filing individual income tax returns falls on June 30th of the year following the tax year. Failing to meet this deadline results in penalties which can be either a fixed amount or a percentage of the individual’s tax liability, depending on which is higher. For individuals who miss the filing deadline, the KRA imposes a penalty of either h 2,000 or 5% of their tax bill, whichever is greater.

Companies face more substantial penalties with late filing resulting in a charge of Sh 10,000 or 5% of the tax payable for the relevant year. Filing tax returns ensures that taxpayers comply with their legal obligations. Additionally, the KRA relies heavily on these returns to collect revenue necessary for funding public services. The data gathered from tax returns also plays a crucial role in identifying tax evaders and enforcing compliance. Furthermore, encouraging more individuals and businesses to file returns contributes to expanding the overall tax base.

Despite ongoing efforts to enhance revenue collection, the KRA has continued to encounter several challenges. In the first nine months of the current financial year, the authority fell short of its pay-as-you-earn (PAYE) target by Sh 72.3 billion. Another persistent issue is the exclusion of the informal sector from the tax base. Many self-employed individuals and workers in the informal economy remain outside the scope of current tax collection efforts, limiting the potential revenue pool.

Recent changes to the tax structure have also introduced complexities. The Finance Act 2023 implemented two new individual tax bands: a 32.5% rate for monthly incomes between Sh 500,000 and Sh 800,000, and a 35% rate for incomes exceeding Sh 800,000. These adjustments aim to create a more progressive tax system but may also present challenges in terms of compliance and enforcement.