Management purge, puzzling tax order mark confusing week at KRA

Times Tower kra headquarters

Times Tower, the Kenya Revenue Authority's headquarters in Nairobi. 

Photo credit: Dennis Onsongo | Nation Media Group

The last six days have been marked by radical changes and confusion at Times Tower, the headquarters of the Kenya Revenue Authority (KRA).

First came a management purge that saw Commissioner-General James Githii Mburu make a surprise exit after more than three years at the helm. At the same time, a major shake-up followed that affected heads of departments. A long-time insider at KRA's audit and intelligence units, Mr Mburu exited more than a year before his term was set to end. 

KRA appointed Rispah Simiyu, the Commissioner of Domestic Taxes, as acting Commissioner-General. 

Days later, KRA announced the suspension of all tax reliefs in a statement signed by board chairman Anthony Ng’ang’a Mwaura.

The move was met by concerns from workers that should tax reliefs on their income be suspended, it would further reduce their pay after contributions to the National Social Security Fund (NSSF) have also gone up. Employed individuals earn a tax relief of Sh2,400 monthly or Sh28,800 annually, while those with an insurance cover get a relief of 15 per cent on the premiums paid for self, spouse or child.

However, the taxman issued a clarification on the directive the next day amid confusion from Kenyans.

Issued irregularly

Yesterday, Mr Mwaura told the Nation that KRA had only stopped processing of refunds on tax reliefs that had been issued irregularly and that the decision has not affected refunds on tax exemptions on donors.

“Stopping tax reliefs will not be there for good, we just stopped them for two weeks to put up good modalities so that we give Kenyans good reliefs. We are putting everything in proper perspective,” he said.

The KRA chairman said the suspension will not affect workers’ earnings.

Some businesses had probed KRA to clarify its Tuesday statement, which had left firms with pending Value Added Tax (VAT) refund applications worried over the fate of their applications. The Petroleum Outlets Association of Kenya said yesterday that suspension of refund payments would heavily hit their businesses.

“Following the pronouncement from KRA on suspension of tax relief, we seek clarity on (whether) VAT refunds are also part of this (and if) withholding tax credits are part of this. Those refunds are the cash flow of last resort for companies,” said the association.

In the clarification issued yesterday,  KRA clarified that it has not scrapped any tax reliefs.

Amendment of the law

KRA said that it will continue to process past and current refund applications while acknowledging that scrapping of reliefs can only be done through amendment of the law.

“KRA acknowledges all the requests from the statement on suspension of tax reliefs, it is important to note that the statement clarifies on the suspension of provisions of relief particularly with reference to refunds, waivers, exemptions and abandonments,” KRA said yesterday.

Lawyers say they will move to court to fight any decision to stop processing of refunds arguing that KRA has no legal powers to do so. Law Society of Kenya president Eric Theuri yesterday said that while KRA is legally empowered to review tax reliefs, refunds and exemptions, it has no powers to suspend the payment of refunds.

On Tuesday, Mr Mwaura said the suspension was informed by growing concerns from Kenyans about how tax reliefs and exemptions were governed.

“The move to suspend payment of tax reliefs allows KRA to audit and enhance the tax relief processes and procedures,” he said.