Taxman pledges to pay Sh2 billion VAT refunds

Kenya Revenue Authority (KRA) has committed to pay firms Sh2 billion as Value Added Tax (VAT) refunds this month, hoping to stem a rising backlog.

This emerged during a meeting last week between the taxman and the Kenya Private Sector Alliance (Kepsa) where it was noted that the refunds were taking a toll on the companies’ liquidity.

KRA is said to owe manufacturers over Sh20 billion in refunds. Kenya Association of Manufacturers (KAM) Chairman Sachen Gupta estimated the refunds in excess of Sh20 billion arising from exports and withholding VAT dues.

He said that if the money was pumped back into business, it would spark an annual growth of Sh50 billion turnover in the industry -- Sh6 billion in VAT collections, Sh1 billion in corporate and income taxes and create 20,000 indirect jobs. 

The taxman said measures were now in place to unify its platform with other agencies such as NSSF and NHIF payments systems.

Already, key milestones have been achieved in the unification of NSSF’s online payment system (SSPAS) and KRA’s iTax, with the full rollout of the unification expected to be achieved by December this year, reducing the number of payments by 12.

The discussions with the traders focused on improving the competitiveness and friendliness of the business environment, mutual partnerships in driving innovative solutions for tax base expansion, and collaboration in the fight against illicit trade.

Also on the agenda was a plan to roll out the proposed Tax Invoice Management System (an enhancement of the current ETR regime), which will enable automatic reporting of tax invoice transactions.

This, KRA said, will ease tax payment and VAT refund processes. KRA said the installed integrated cargo management system has enhanced efficiency in non-intrusive verification and intelligence-based risk profiling to establish which goods to undergo physical verification. 

KRA Chairman Francis Muthaura emphasized the need to enhance revenue collection via voluntary compliance. He acknowledged the need to open up dialogue channels for the mutual benefit of the Government and the private sector.

Kepsa Chairman Nick Nesbitt lauded the KRA initiative to engage the private sector, saying the move was approachable and friendlier. “It is imperative that businesses can now work together with the revenue authority,” said Nesbitt.

KEPSA Chief executive Carole Kariuki praised the implementation of reforms in supporting the private sector, such as the rollout of the electronic cargo tracking system and elimination of cargo diversion and other illicit trade.

Others are technology in tax administration such as iTax, VAT auto assessment system and the proposed Tax invoice management system. KRA Commissioner General John Njiraini promised dialogue in getting a resolution to challenges facing the business community.

The gains made by KRA include increased transparency and professionalism in tax disputes resolution and in customer relationship management.

The agency has also introduced scanning technology for cargo management and faster clearance, as well as installing a rail-based scanner for goods on transit via the standard Gauge Railway.