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The Tax Amendment Bill, 2020 (the Tax Bill) seeks to amend a number of laws to (amongst other things) address and mitigate the effects of the current COVID-19 pandemic in Kenya.
The pandemic has caused widespread disruption to lives and businesses and we welcome Parliament’s initiative at introducing regulatory and legislative responses to address issues arising from the pandemic.
In our letter which was submitted to the National Assembly today, we have expressed our concerns with regard to the Tax Bill as follows:
1. New material amendments introduced: New material amendments which are unrelated to tax matters have been introduced in the Tax Bill yesterday (on 21 April 2020). These relate to (a) contracts, (b) leases and licences, (c) mortgages and borrowings, and (d) employment matters (see sections 499 to 501 of the amended Tax Bill).
The amendments are entirely unrelated to tax matters and ought to be covered in a separate statute e.g. a Miscellaneous Amendment Act rather than including them in the Tax Bill where they could escape the scrutiny of legislators and affected stakeholders.
2. No opportunity for public participation on new amendments: The Tax Bill has undergone the 2nd Reading in Parliament this morning and is scheduled to undergo the 3rd Reading in Parliament this afternoon (22 April 2020). This, unfortunately, leaves no room for public participation on the new material amendments, contrary to section 5 of the Statutory Instruments Act which requires regulation-making authorities to make appropriate consultations with persons who are likely to be affected by a proposed statutory instrument before making such statutory instrument.
3. Our high-level key comments on new proposed amendments:
Based on our limited review of the new proposed amendments, the following is a summary of key issues should be considered:
a) Some provisions are anti-business: a number of the new proposed amendments anti-business and have the risk of stifling investment and free enterprise. They could result in businesses in Kenya that are impacted by the new proposed amendments facing the risk of insolvency. A key weakness is that the provisions do not have a Sunset clause.
b) Employment Act provisions (see section 501 of Tax Bill):
c) Provisions on leases and licences (see Paragraph (d) under Section 499 of Tax Bill): The provision prohibits termination of leases and licenses of immovable property in connection with non-payment of rent and other monies (presumably this relates to both residential and commercial premises). This provision has the following shortcomings:
d) Provisions on loan and mortgage repayments moratorium on interest and penalties by a lending financial institution and prohibition of certain contractual obligations under existing contracts (sections 499 and 500):
In the circumstances, we respectfully submit that the new proposed amendments contained in Sections 499 to 501 should not be included in the Tax Bill but should instead be deleted altogether and passed under a separate statute once legislators and affected stakeholders have had an opportunity to fully consider the proposals and comment on them following public participation.
Finally, many countries are enacting legislation and the Commonwealth is also spearheading an initiative. We should urgently learn from shared experiences.