Govt to ‘pay’ tax refunds- KEPSA

Posted on February 27, 2015


Following last year’s commitment by HE President Uhuru Kenyatta, during the KEPSA Presidential Roundtable; to have the government clear VAT refunds to the private sector, the national Treasury has today announced the commencement of payment on VAT refunds. In a Press release in today’s dailies the National Treasury and KRA say they have concluded a verification exercise that established that the government owes KES 19. 2 billion in VAT refunds.

The National treasury says the first instalment amounting to KES. 11.2 billion, has been processed and verified and KES. 9.3 billion, is payable. The payments will be made in three categories:

  1. Those claimants with no debt where the payable amount is KES. 2.3 billion- This amount will be paid immediately.
  2. Those with debts, but have a positive balance. The amount payable to this category is KES. 4.7 billion, but have a debt of KES. 2 billion. The net payable is KES 2.7 billion. The debt will be reconciled by KRA and any payable amount paid immediately.
  3. Those claimants where the debt is more than what is payable to them. The amount payable to this category is KES. 2.7 billion, but the debt amounts to KES 11 billion. The debt will be reconciled with a view to having the claimants settle their debts with KRA.

The statement further states that;

‘The second and final instalment amounting to KES. 8 billion us being processed and payments will be made immediately after verification and debt reconciliation are finalized. This whole process is expected to be finalized before 30th March, 2015.’

The statement is in line with commitments made during yesterday’s meeting between KRA and KEPSA, where KRA pledged to work with treasury to resolve the VAT refund issue by the end of March. To avoid generating any more payment backlogs KRA says it is currently able to process 81% of new claims within 90 days, by utilizing the iTax system to speed up the verification process.

During the forum, KRA committed to the development of an alternative dispute resolution mechanism; to forestall the growing number of cases filled through the judicial system. KRA Commissioner General John Njiraini, say new platform for dispute resolution will be anchored on the Tax Procedures Bill which is set to be tabled in parliament.

‘We hope that this internal structure for dispute resolution will enable us resolve up to 80% of disputes out of court. The court process is time consuming and expensive and harms our relationship with our customers.’ Mr. Njiraini said.

KRA has also announced the elimination of random Tax audits that are currently being exploited by wayward employees as rent seeking avenues. According to KRA, all tax audits will now be conducted through a formalized structure that will see KRA notify and justify the need for a tax audit; with clearly stipulated reasons as to why the audit is being carried out.

We the Kenya Private Sector Alliance commend the move by the National Treasury and KRA to resolve this outstanding issue and look forward to collaborating with both Treasury and KRA to drive the tax reform agenda as we strive to market Kenya as an investor friendly destination.



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