Amnesty is, more often than not, used to express 'freedom' and the time when prisoners can go free. But what about tax amnesty? Tax amnesty is a limited-time opportunity for a specified group of taxpayers to pay a defined amount, in exchange for forgiveness of a tax liability (including interest and penalties) relating to a previous tax period or periods and without fear of criminal prosecution.

A Tax amnesty program provides comprehensive tax relief while avoiding criminal prosecution. Typically a state or Kenya Revenue Authority (KRA) tax amnesty schedule has a very short window of opportunity. Generally, the state will waive penalties if you file returns and pay your taxes during the amnesty period. You must be cautious though, the state will impose larger than normal penalties if you fail to take action during the amnesty period.

In Kenya for instance, the Minister for Finance announced a Tax Amnesty on 10th June, 2004 when presenting the 2004/2005 Budget. The Finance Act 2004 amended the VAT Act by inserting a new Section 14A which provided for Tax Amnesty where:

• The Tax was paid
• All returns or amended returns in respect of the tax were submitted on or before 31 st December,2004 provided that the taxpayer was not under audit or investigation for the period Amnesty was applied for.

Kenya Revenue Authority required that Amnesty applications strictly follow the procedure below:

• Submission of the application for tax amnesty,
• Submission of returns or amended/additional returns on the undeclared tax,
• Declaration and payment on or before 31 st December, 2004 of any tax which had not been declared before 11 th June, 2004.