KRA pays Sh25bn VAT refunds as year ends

The Kenya Revenue Authority (KRA) has paid Sh25 billion in Value Added Tax (VAT) refunds to businesses following a presidential order.

KRA’s deputy commissioner for marketing and communication, Grace Wandera, in a letter to the Kenya Private Sector Alliance, said Sh21.4 billion had been paid in VAT refund claims as of June 12.

Another Sh3.6 billion, she said, has been appropriated for payment by the end of June, bringing the total payment in the current financial year to Sh25 billion.

“Additionally, KRA has sought an enhancement of monthly VAT refunds allocation from the current Sh1.2 billion to Sh3 billion from the National Treasury to help cope with the increasing number and value of claims,” said Ms Wandera in the June 19 letter, adding that the total value of claims, however,  stood at Sh57.3 billion as at the end of May.

President Uhuru Kenyatta in March ordered that the funds be released in three weeks, but more than two months later, businesses were yet to receive them.

LIQUIDITY PAIN

The disbursements will come as a big relief to enterprises facing liquidity constraints caused by slow business during the coronavirus pandemic.

The VAT refunds and the pending bills were supposed to have been processed in April to cushion the country against the economic effects of Covid-19.

Payment of VAT refunds and reduction of the VAT from 16 percent to 14 percent are part of the measures announced by President Kenyatta in March to cushion Kenyans and traders.

Friday, Carole Karuga, chief executive at Kepsa, in a separate phone interview, told the Saturday Nation the KRA move to pay the refunds is laudable.

She said the refunds will offer financial relief to businesses hit worst by the Covid-19 pandemic, especially in horticulture, transport and hospitality.

SPECIAL FUND

“We are happy that KRA is paying pending VAT refunds. It is something we have been pushing for and we are happy that the money is finally out,” she said.

“We hope that they will continue paying as more funds comes from the Treasury.”

The payment has come at a  time industrialists are lobbying the Treasury to create a fund beginning July 1 for timely payment of tax refunds to ease their perennial cash-flow challenges.

The Kenya Association of Manufacturers, in its 2020/21 budget push, wants changes to the Public Finance Management Act to compel the Treasury and National Assembly to allocate billions of shillings monthly to the KRA to clear VAT refund claims.