What you need to know:
- KRA projects a rise in claims for VAT refunds at a time most small firms are facing cash-flow woes.
- KRA has over the years struggled to pay the claims, largely due to inadequate cash provided by the Treasury.
The taxman is seeking increased monthly allocations from Treasury to settle a mounting backlog of tax refund claims from businesses grappling with the coronavirus pandemic-related hardships.
Kenya Revenue Authority (KRA) says it has applied for Sh3 billion up from the current Sh1.2 billion allocations amid the backlog and new claims filed for Value Added Tax (VAT) refunds.
KRA projects a rise in claims for VAT refunds at a time most small firms are facing cash-flow woes that in addition to the backlog, will pile more pressure on its constrained budget.
The taxman paid Sh25 billion in VAT refunds in the year ended June up from Sh14.1 billion paid in the 2018/19 period.
“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,” the taxman said Wednesday.
Sh62.3 billion claims
The taxman said that the VAT refund claims for the 2018/19 and the 2019/20 periods stood at Sh62.3 billion as at end of June.
The amount is, however, less than the Sh5.5 billion proposed by manufacturers in February to guarantee a monthly disbursement from last July in a bid to clear a backlog of bills arising from VAT zero-rated supplies.
KRA has over the years struggled to pay the claims, largely due to inadequate cash provided by the Treasury and a lengthy verification process.
The Treasury in June last year formed a team to “quickly validate” outstanding refunds that it said had hurt cash flow and liquidity of businesses, especially manufacturers.
KRA that it carried forward 6,106 outstanding claims valued at Sh24.3 billion from the financial year ended in June 2019 to the current year despite a directive by President Uhuru Kenyatta to State ministries, departments and agencies to clear all verified arrears.
The mounting dues, manufacturers have said in the past, have forced some of them to put on ice investment and expansion plans, hitting creation of jobs for growing unemployed but skilled youth.