Kenya: Taxman Beats Hasty Retreat on PINs Cancellation Plan

The taxman has beaten a hasty retreat on plans to deregister more than 62,000 personal identification numbers (PINs) of individuals and businesses for failure to file tax returns.

The Kenya Revenue Authority (KRA) had issued a 30-day notice that taxpayers who had not filed their tax returns and had not given their reasons for not doing so would have their PINs cancelled at the expiry of the notice.

A PIN is a necessity for any individual or business wishing to engage in transactions such as registration of a title deed, a motor vehicle or a business name. It is also necessary for underwriting of an insurance policy and acquiring a licence to conduct business.

The PIN is also used in importation and exportation of goods, payment of power and water connection fees and opening of bank accounts.

"Failure to file tax returns, unless cause is shown to the contrary, the Commissioner of Domestic Taxes shall have their Personal Identification Numbers deregistered and cancelled from the KRA system at the expiration of the 30 days from the date of this notice," KRA said.

But KRA is required by law to write to PIN holders before their PINs are cancelled, a realisation the taxman seems to have made before quickly issuing a fresh notice.

To avoid running afoul of the law, the KRA, in the new notice issued on Tuesday, said it would first notify the taxpayers in writing before proceeding with the cancellation.

"The Commissioner of Taxes may, at any time and in writing, cancel a PIN issued to a person, and issue the person with a new PIN," states the Tax Procedures Act on what the KRA must do before deregistering a PIN.

Filing of tax returns for the income year ending June 30, 2021 began on January 1 and will be closed on June 30.

"KRA has noted that there are persons who though registered for tax, have perennially failed to file their tax returns or account for taxes. Where such persons are no longer required to be registered for tax, they should notify the commissioner of the same for purposes of deregistration in line with the provisions of Section 10 and 14 of the Tax Procedures Act, 2015," the KRA said in the fresh notice.

"Please be advised that the commissioner shall notify the affected taxpayers of the intention to deactivate/cancel their registration, via their iTax registered email addresses," it said.

KRA notes the initial notice was erroneous as it omitted the provision that it should contact the taxpayers before cancelling their PINs as required by law.

"We are required by law to contact the holders of the PINs before we initiate the process of removing them from the system. The notice that we issued earlier did not capture this aspect, which is why we made the new notice to remind that we will write to them first," the KRA said.

Mr Nikhil Hira, a tax expert at Bowmans Kenya, said many taxpayers might be facing difficulties to meet their tax obligations especially due to the Covid-19 pandemic, and that some of the account holders who have not filed their taxes may have died or left the country.

Mr Hira said KRA is empowered by the law to deregister the PINs of those who do not file returns, provided it does so in accordance with the law.

"It is important to note that while the KRA is allowed to cancel the PINs of taxpayers for various reasons, it is also required to follow the necessary law and procedures while doing so," Mr Hira said.

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