The Kenya Bankers Association (KBA) has approached Parliament seeking a review of the recently enacted Finance Act, 2023, expressing significant concerns about the administrative complexities faced by commercial lenders under its stipulations.
The act has mandated that firms operating in high-risk tax under-declaration sectors remit dues every five days, a move that has raised challenges for the banking industry.
The National Assembly's Finance and National Planning committee, led by Molo MP Kuria Kimani, had previously amended the Excise Duty Act in July through the Finance Bill, enabling the taxman to enforce a stringent five-day deadline for remittance of excise duty on various firms.
This deviates from the previous norm where tax on excisable goods and services was due on the 20th of the subsequent month.
Kennedy Mutisya, acting KBA Finance Officer, emphasized the daily accrual of interest and payment mechanisms in banks, stating, "I pay interest every single day and also accrue interest on a daily basis. The new law does not look at payment and accrual differently."
He further highlighted the heightened frequency of computation and remittance required by the law, mentioning the shift from a monthly to a daily basis for compliance by the 5th day of tax collection.
The Finance Act, of 2023, has sparked controversy by extending the obligation of tax remittance every five days to commercial banks.
This change particularly impacts sectors identified as having a high risk of tax under-declaration, such as betting and gaming.
Wilfred Alambo, Equity Bank Group Tax Manager, pointed out the transfer of administrative burden to commercial banks and the necessary investment in technology to streamline the process of remitting taxes every five days.
"For instance, we have to invest in new technology to replace human resources to facilitate the administrative issue of five days of remittance of taxes," Alambo explained.
The concerns raised by the banking sector underscore the complexities and challenges imposed by the new law, compelling the industry to adapt to a more frequent tax remittance schedule and invest in advanced technology to comply with the altered regulations.
The KBA's plea to Parliament for a review signals a push for a balanced, sustainable approach that considers the practical implications for financial institutions dealing with the daily collection and remittance of taxes.