RECONCILING TAX ENFORCEMENT AND FINANCIAL CONFIDENTIALITY: A CRITICAL ANALYSIS OF SECTION 59 OF KENYA’S TAX PROCEDURES ACT, 2015

Abstract

The right to swing your fist ends where the other person’s nose begins. The relationship between a government and its taxpayers with regard to financial confidentiality and data protection is of a similar nature. This article critically examines the implications of Section 59 of the Tax Procedures Act (TPA) on the principle of financial confidentiality in Kenya. This provision allows the disclosure of taxpayers’ sensitive information to third parties for purposes of tax compliance. This raises significant concerns regarding the delicate balance between promoting tax compliance and safeguarding the right to financial privacy. The article highlights the potential constitutional conflicts arising from such disclosures, particularly concerning data held by financial institutions, and discusses how this could undermine established legal protections and individual rights enshrined under Article 31 of the Constitution of Kenya, 2010, as well as in the Data Protection Act 2019. Through a detailed analysis, and comparative evaluation of the Europeans Union’s Approach to financial confidentiality, United Kingdom’s approach and South Africa Approach, the article argues that the current legislative framework, which allows blanket third-party disclosures, may violate constitutional safeguards against unwarranted invasions of privacy. It advocates for a comprehensive reassessment of the relevant provisions within the TPA, emphasising the need for enhanced judicial oversight and robust data protection measures. By proposing amendments to the legislation, the article seeks to ensure that individual rights are adequately protected while maintaining effective tax administration.