Edible oil makers demand 2pc late tax refunds fine

Kenya Revenue Authority’s head office at Times Towers, Nairobi. FILE PHOTO | NMG 

In Summary

• The manufacturers want outstanding refunds to continue attracting a two percent monthly penalty until full payment is made.
• They have also called for the reduction of the six percent withholding Value Added Tax (VAT) to two per cent to help businesses fund their expansions.
• Delay in tax refunds, estimated at Sh20 billion, has been blamed for an emerging trend where manufacturers adopt a price hikes to mitigate cash flow problems.

By JAMES KARIUKI
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Edible oil manufacturers want the Treasury slapped with a two percent monthly penalty for delayed refund of overpaid taxes starting from the end of the first 30 days.

In a petition sent to Parliament, the manufacturers said outstanding refunds should continue attracting the penalty until full payment is made.

“The National Assembly should propose appropriate reforms to tax laws providing for interest payments after lapse of a 30-day period. This will ensure taxpayers do not continue to suffer from cash-flow constraints resulting from Treasury delays,” they said.

The stakeholders also called on parliament to immediately intervene and reduce the six percent withholding Value Added Tax (VAT) to two per cent saying many manufacturers suffer stunted growth owing to lack of money to fund expansions, meeting loan obligations as well as funding other operational expenses.

Withholding VAT was reintroduced through the 2014/15 fiscal budget cycle to track movement of processed goods from manufacturers into the market thereby reducing tax evasion.

Price hikes

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Observers have blamed delay in tax refunds estimated at Sh20 billion for an emerging trend where manufacturers adopt a price hikes to mitigate cash flow problems thereby making Kenyan-made goods uncompetitive locally and in foreign markets.

This has seen retailers show preference for low priced imports hurting Kenya’s prospects of creating the much needed jobs for its growing youthful population in the manufacturing sector.

“Kenya Revenue Authority (KRA) owes taxpayers Sh20 billion with the bulk of it being owed to oil manufacturers. Manufacturers and retailers have incurred huge losses as they are forced to absorb these losses denying them much needed funds to pay suppliers, service loans as well as inject fresh funds into the business,” said the statement.

Manufacturers also lamented the current legal arrangement where a one per cent penalty is introduced after a two-year delay, which they said was too long.