Recently as I was traveling to the village, I sat next to a gentleman and decided to start a small talk. After all, it was a long journey and I was not sleepy. “This Corona pandemic has really hit us badly,” I started. Fortunately, the gentleman responded in a friendly manner and we went on to chat for hours. We talked about the government, politics, economy and taxes, among other things.
“I’m very afraid of KRA,” the gentleman stated as soon as we started discussing taxes. “Why?” I asked, and he went on to narrate how he had neither been making declarations of his income nor paying taxes. As a result, he had incurred huge penalties and interests. He was very scared of visiting any KRA office due to fear of prosecution, since tax evasion is a crime.
“Well, I have good news for you” I responded. Being a tax educator, I found this to be an opportune moment to educate the gentleman on Voluntary Disclosure Programme (VDP), which is one of the key highlights of the Finance Act 2020.
Voluntary Disclosure Programme (VDP) is a confidential programme where when a taxpayer discloses tax liabilities that were previously undisclosed to the Commissioner, the taxpayer will be granted relief of penalties and interest accrued on tax disclosed. The programme shall be open for a period of 3 years effective 1st January 2021, and the disclosures eligible under the programme will be for tax periods of up to 5 years prior to 1st July 2020.
If the application is accepted, the taxpayer shall be granted a 100% remission of interest and penalties, if the disclosure is made and the tax liability paid within the 1st year of the programme. Taxpayers who make disclosures and pay tax liabilities in the 2nd and 3rd year will be granted 50% and 25% remission respectively.
Once a taxpayer is granted relief under VDP, they shall not be prosecuted for their previous tax liabilities. However, although the program is open to all taxpayers, those under audit, investigation or are party to an ongoing case involving their tax liability will not be eligible. This also applies to taxpayers who have been notified of a pending audit or investigation by the Commissioner.
The whole concept of “go-and-sin-no-more” was so exciting to the gentleman that as he alighted from the bus, he assured me he would be the first person to apply once the programme became effective.
This Voluntary Disclosure Programme is a very well thought amnesty initiative for all ‘tax evaders’ as it offers them an avenue to ‘make it right’ without any fear of prosecution or imposition of punitive penalties and interest. The programme aims at improving revenue collection through enhanced compliance by bringing more taxpayers from the underground economy into the tax net.
It is an opportunity you cannot afford to miss.