In Brief
– Business operators in the private sector have blamed the low cash liquidity in the economy on failure by KRA to make timely VAT refunds.
– The taxing body, on the other hand, blames poorly structured claims and insufficient funding from the treasury for the backlogs.
The tax body in the land, Kenya Revenue Authority (KRA), has dismissed applications seeking VAT refunds amounting to Sh6.1 billion for the financial year ending December 2019. The taxman, through the Commissioner for Domestic Taxes Department Elizabeth Meyo, has attributed the move to the lodging of faulty complaints by taxpayers, saying they cannot be authenticated and hence the rejection.
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This comes in the wake of sustained uproar from the private sector which has cited the delay in tax refunds as the major cause of the low cash liquidity currently being experienced in the market. Statistics indicate that as of December 31, 2019, KRA owed businesses amounts totaling to Sh24.7 billion.
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KRA also attributed some delays in refund to low funding from the National Treasury noting that the cash ministry allocates them Sh1.2 billion for VAT claims payment per month, against total claims that amount to an average of Sh2.5 billion. This gap essentially gives room for the accumulation of unsettled claims.
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It has been noted that manufacturers have the highest stake in refund claims due to their foreign business transactions. The Kenya Association of Manufacturers (KAM) has appealed to the government to hasten the refund processes as a move to cure the ailing economy.
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