Thursday, June 21, 2012

You must pay up, landlords told


You must pay up, landlords told

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Kenya Revenue Authority’s Commissioner-General John Njiraini said what he would implement had a solid backing in the Income Tax Law and that no one will be spared. Photo/FILE
Kenya Revenue Authority’s Commissioner-General John Njiraini said what he would implement had a solid backing in the Income Tax Law and that no one will be spared. Photo/FILE 
By PAUL WAFULA pwafula@ke.nationmedia.com
Posted  Wednesday, June 20  2012 at  22:30
IN SUMMARY
  • Taxman asks lobbyists to keep off revenue matters, says fresh drive to collect money from house owners grounded in law
The taxman has told off lobby groups threatening court action against its decision to ensure that landlords pay income tax and warned that no one will be spared.
Kenya Revenue Authority’s Commissioner-General John Njiraini on Wednesday said what he would implement had a solid backing in the Income Tax Law.
He was speaking at the beginning of a two-day annual budget review workshop organised by the Institute of Certified Public Accountants of Kenya (ICPAK) at Hilton Hotel in Nairobi.
Mr Njiraini told the lobby groups that going to court was a futile exercise unless they were keen on having the Income Tax Law suspended. He said the revenue collector was determined to ensure that all players in the real estate sector, including those who develop properties for sale were in the tax bracket.
“Rental income, has like any other business income, been subject of taxation for as long as I can remember. Those who have not been paying therefore have been evading tax, which has both criminal and civil liability implications,” he said.
KRA is also lobbying key stakeholders to support the enactment of a VAT Bill tabled in Parliament last week to eliminate tax subsidies on all goods, save for those being produced for export.
The Consumer Federation of Kenya (Cofek) on Monday threatened to go to court to block KRA from charging tax on rent for residential houses arguing that the proposal may be abused by unscrupulous landlords as an excuse to increase rent.
Mr Njiraini’s position is shared by the Urban Tenants Association — the lobby group for tenants and landlords and the Institution of Surveyors of Kenya (ISK), the professional body governing real estate.
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The commissioner-general warned of consequences for those who had not been paying the tax, saying their buildings were there to stay and sooner or later they would catch them.
He said that KRA would make it mandatory for tenants to declare who their landlords were when filing income tax returns to help net non-compliant landlords.
This makes the possibility of rent increments by upto 30 per cent real given that most unscrupulous landlords would opt to increase rents to cushion their earnings from the taxman.
Already the ISK says it has received complaints from its members that some landlords have issued notices to increase rent well before the taxman gets them.
Finance minister Njeru Githae last week asked KRA to start mapping all residential and commercial buildings to ensure all landlords are brought under the tax bracket from next month.
The Central Organisation of Trade Unions argues that enforcing the directive would result in double taxation on property owners who are already paying rates to local authorities.
ISK argues that transferring the tax to tenants may increase the landlords’ gross income but may not affect the net income.
Registered property management firms have welcomed the move, saying it will create a level field for those who have been paying and the defaulters.

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