New team to review VAT refund claims

The Kenyan business community will have to wait until a taskforce formed by the Treasury cabinet Secretary reviews value added tax refunds claims to get its money.

The team, according to Mr Henry Rotich, is expected to report back to him in two months with genuine claims before the refund begins.

“I expect the first batch of Sh10 billion to be repaid by January next year,” he said at this year’s annual taxpayers award ceremony in Nairobi Tuesday.

The taskforce, said the cabinet Secretary, was charged with evaluating multiple VAT refund claims that had risen to Sh30 billion by last month, and chart the way forward.

The taxman has been accumulating an average of Sh1.2 billion monthly in refunds, although the Treasury allocation for payment has consistently fallen short of the requirement.

In the 2013/2014 fiscal year, for instance, the Treasury reserved Sh15 billion for refunds which means that it can only meet half of the Sh30 billion arrears in claims.

The Value Added Tax 2013 Act, which came into force last month has, however, reduced the claims by Sh600 million every month. It cut by more than 300 the number of goods on which refunds can be claimed.

Accumulated claims resulted from the fact that many goods were previously zero-rated in terms of VAT allowing manufacturers to claim back related input tax.

The concern has, however, been the lengthy audits conducted before KRA can make a refund to avoid ghost payments.

The Kenya Association of Manufacturers said delays in releasing the refunds was hurting the cash flow of companies, forcing them to turn to expensive financing from commercial institutions.