In Kenya, by law, all income is taxed. Failure to file your taxes amounts to tax evasion which is an offence. Tax evasion is deliberately ignoring to pay your taxes or making false tax declarations like filing Nil returns while you are earning. Evasion of tax is an economic crime and the penalty for the offence is either a fine or imprisonment or both. The amount of fine to be paid or the imprisonment term will be in relation to the tax offence committed.
There are many types of taxes imposed by the Kenya Revenue Authority but the two main ones are; Direct taxes and indirect taxes. When you purchase any goods or taxes, you will be required to pay the Value Added Tax (VAT), which is what is referred to as indirect taxes. VAT is usually 16% of the price of the product or service, all of us pay this kind of tax knowingly or unknowingly.
Direct tax, on the other hand, involves the collection of income tax like the Pay as You Earn (PAYE) which is paid by individuals that are employed. Every month, a certain percentage of their salary is deducted by their employer and forwarded to the KRA. If the employer fails to remit the taxes collected from their employees’ salaries, KRA will consider this tax evasion and they will be fined KES 1,000,000 and 1% interest until the full tax amount is paid. This is also considered an offence by law that is liable to 6 months imprisonment and a fine not exceeding KES 100,000 or both.
It is through the direct tax that KRA charges all individual both residents and non-residents on corporation income, rental, investments, agricultural and employment income. Failure to disclose your income is an offence liable to six months imprisonment or a fine not exceeding KES 100,000.
Tax evasion manifests itself in failure to pay taxes, using forged books of accounts, failure to withhold taxes, not paying correct import taxes and misstatement of expenses. Such tax crimes inhibit the development of our Nation when it comes to the mobilization of domestic resources needed to finance the development in a sustainable way. Thus the government will constantly need financial aid through loans to develop the Nation.
As Kenyan citizens, we need to abide by all tax laws and file our tax returns. It’s our duty and we should all abide by it.