KRA may surrender Sh20bn to exporters

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

In Summary

• KRA has for the last two years been collecting 16 per cent VAT on all goods and services produced in Kenya for the international market.
• KRA is holding in excess of Sh20 billion accrued from exporters as outstanding VAT tax refunds in the last two years.

By IBRAHIM ORUKO
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The taxman has been dealt a blow after a committee of the National Assembly recommended that Value Added Tax Regulations, 2017, be annulled in their entirety as they violate the law.

The Kenya Revenue Authority (KRA) has for the last two years been collecting 16 per cent VAT on all goods and services produced in Kenya for the international market on the basis of the regulations, which National Treasury CS Henry Rotich published in March 2017.

As a result, KRA is holding in excess of Sh20 billion accrued from exporters as outstanding VAT tax refunds in the last two years.

However, the committee on Delegated Legislation has adjudged the levies as illegal and wants the taxman to surrender the funds to the owners because the implementation of the regulations has no legal basis as they were not approved by the National Assembly as required by law.

BACKLOG

Exporters have complained that the implementation of the regulations has increased backlog in VAT tax refunds as KRA forces them to obtain what they say is unnecessary documentation which has negatively impacted the manufacturing sector.

A report on the regulations prepared by the committee, which is chaired by Uasin Gishu Woman Rep Gladys Shollei, faults KRA for implementing the regulations without the requisite approval.

The committee further established that the regulations, which were to operationalise the VAT Act of 2013, were not subjected to public participation and that their implementation is onerous and a significant handicap to the growth of the manufacturing and agricultural sectors.

REGULATIONS

“The regulations have reversed gains Kenya has made in improving the ease of doing business and are a major deterrent to prospective investors,” the committee notes in its report.

While the law gives Cabinet secretaries the power to make regulations, the same law mandates the CSs to submit the regulations within seven days to the National Assembly for scrutiny and approval before implementation. This was not done but KRA went to start charging VAT for all exports.

When he appeared before the committee on Tuesday last week, Mr Mohamed Omar, KRA Commissioner in charge of Strategy, said the National Treasury complied with the law and submitted the regulations to the House for scrutiny as required. However, he didn’t provide proof of the claims.