SCRUTINY

KRA rejects Sh6.1 billion VAT refunds on lack of proof

There is a total of Sh80.9 billion questionable pending bills owed to suppliers both by national and county governments.

In Summary
  • Lack of proper documentation has forced the taxman to heighten scrutiny on claims to evade wrong payments and possible fraud.
  • Manufacturers are among the biggest seekers of VAT refunds owing to their import and export activities
Acting Treasury Cabinet Secretary Ukur Yatani, KRA Commissioner General James Githii Mburu and KRA Customs & Border Control Commissioner, Kevin Safari, at the KRA offices in Nairobi on August 21, 2019
MONEY MEN: Acting Treasury Cabinet Secretary Ukur Yatani, KRA Commissioner General James Githii Mburu and KRA Customs & Border Control Commissioner, Kevin Safari, at the KRA offices in Nairobi on August 21, 2019
Image: FILE

Kenya Revenue Authority (KRA) rejected Sh6.1 billion VAT refund claims in the financial year to December 2019, in heightened scrutiny of applications.

This is in the wake of a continued outcry by the private sector, which has blamed pending government bills and delayed tax refunds for the current low liquidity in the market.

As of December 31, an outstanding amount owed to businesses totaled 24.7 billion. During the half-year period(July-December) KRA paid VAT refund claims amounting to Sh9 billion, the authority's data indicate.

 

KRA Commissioner for Domestic Taxes Department Elizabeth Meyo has now moved to clarify the delays in a refund, saying processes are partly delayed by lodging of inaccurate claims by taxpayers (wrong declarations), leading to rejection of claims.

Lack of proper documentation has forced KRA to heighten scrutiny on claims to evade wrong payments and possible fraud.

“Currently, claims amounting to Sh1 billion cannot be processed because the refund claimants are yet to provide required documents,” the commissioner's office told the Star, “Inadequate provision of required documents is needed to enable faster processing of claims.”

Other causes for delayed VAT refunds, according to KRA, is a high risk of cargo diversion.

The taxman has called for accountability by other agencies, noting the need for rigorous verification so that no case is perceived to be refunded when having debt or without export, verification owing to risks of export diversion.

The process is hurt by the need for debt validation and export verification and the inclusion of other time-consuming activities that are not part of the refund process.

Times Tower has also lamented low funding from Treasury. Currently, the National Treasury allocates Sh1.2 billion to pay VAT claims per month while the monthly claims lodgements from refund claimants average Sh2.5 billion.

 

This, KRA says, creates a deficit that leads to the backlog.

“To address the challenge, KRA has requested additional funding from the National Treasury,” the authority responded to inquiries by the Star.

KRA has put in place appropriate measures in place including implementation of the green channel framework to fast track processing of low-risk claims and establishment of a full-time project team to process the backlog claims in the next three months,” it said.

Manufacturers are among the biggest seekers of VAT refunds owing to their import and export activities, with the Kenya Association of Manufacturers(KAM) calling on the government to ensure faster clearance to ensure address liquidity challenges.

“We have to ensure we refund VAT refunds to exporters and manufacturers on a good time because that is their cash flow and what they need to inject life into their businesses,” KAM chief executive Phyllis Wakiaga.

She has also called on the government to clear pending bills owed to suppliers and ensure a “predictable and stable policy environment” for the country to attract investors.

“We must ensure certainty for investors when they invest, without having ad-hock introduction sometimes of fees, charges, and other taxes during the course of the investment,” Wakiaga told the Star.

There is a total of Sh80.9 billion questionable pending bills owed to suppliers both by national and county governments.

National Treasury CS Ukur Yattani recently warned he will go hard on ministries, government agencies and counties delaying to pay suppliers.

It has a direct effect on the stability and growth of the private sector, that is what we are confronting, making sure that we reign in on all government agencies, ministries even the county government, and make sure that what belongs to the SMEs and the private sector are paid adequately,” the CS said.