Boost for firms as KRA pays Sh4.7b tax refunds : The Standard

The Kenya Revenue Authority (KRA) has paid out Sh4.7 billion in Value Added Tax (VAT) refunds to manufacturers in the last two months. The taxman has also committed to paying a further Sh8 billion by the end of this month in what is expected to ease cash flow problems for struggling businesses amid a persistent credit crunch to the private sector. Manufacturers are owed Sh20 billion in VAT refunds and have been complaining of a liquidity crisis. During his budget speech, Treasury Cabinet Secretary Henry Rotich promised that a bulk of the refunds would be cleared within the next two months so as to boost businesses’ cash flow.

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Responding to a query by The Standard, KRA said it paid out Sh2.2 billion worth of refunds in April and Sh2.5 billion in May. The taxman said the arrears are being processed even as the Government seeks cash to settle them. “The remaining amount is being processed on a case by case basis and funds sought to pay,” said a statement from the Domestic Taxes Department. Kenya Association of Manufacturers Chief Executive Phyllis Wakiaga said manufacturers face a huge financing gap caused by delay in settling the ever-rising tax refunds. This, she said, has forced many businesses to finance their operations from market-rate loans currently at 14 per cent. “This is an additional cost which is loaded onto the final unit cost of production, making the product uncompetitive, especially in the export market,” she said.

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VAT refunds come about as a result of the VAT export refund formula and the six per cent withholding VAT. Last year, Treasury projected that Sh14.4 billion would be paid out in VAT refunds to traders and manufactures in the financial period ending June 31, 2019. Manufacturers have been pushing for both to be reviewed and during the budget speech, their wish was granted. CS Rotich proposed the reduction of the rate of VAT withholding tax from six per cent to two per cent, saying it was to blame for the buildup of huge tax credits.

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Related Topics

Value Added TaxKenya Revenue AuthorityTax refunds