Taxman pledge on Kenya VAT returns

November 24, 2009
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, NAIROBI, Kenya, Nov 24 – The Kenya Revenue Authority (KRA) has pledged to complete the auditing process that was set to facilitate filing of the Value Added Tax refunds following Finance Minister Uhuru Kenyatta’s promise to provide financial assistance to the tax collecting unit.

KRA Commissioner General Michael Waweru has said that a government pledge to help settle the outstanding arrears would assist the tax collecting unit make the refunds by March next year.

“The Finance Ministry is providing resources to enable us clear the unsettled refunds by the end of first quarter. Therefore with that promise made we would have no reason for having any genuine outstanding VAT claims,” he said.

He revealed that the delay in payments was partly caused by a reduced allocation of funds by the government.

“This year the average monthly refund amount (provided in the budget) is Sh1.1 billion. This is not enough; sometime ago the minister used to provide a lumpsum at the end of the year like in 2003/04 the ministry allocated Sh3 billion. That was very helpful but after sometime however the funds stopped coming in and the arrears have been building up,” he explained.

Mr Waweru added that those who thought revenue would be lost at the implementation of the East African Common Market protocol were being shortsighted.

“Even though you may lose revenue from one aspect of the business with increased volume of trade you should expect to increase revenue from other aspects. In any case that is what everyone else has done to increase trade, to be seen as a block, to attract investment and when you increase investment you increase from the employee and the profits the investors will be making,” he explained. 

He added that the implementation of the common external tariff from the Common Market Protocol and the duty elimination between the three East African countries had led to an increase in revenue.

“Every one of the revenue administrators within this region has reported earnings so we expect that the common market and the customs union coming into full force will improve trade and revenue for everyone,” he said but did not disclose the exact rise in revenue. 

Speaking during the launch of KRA’s fourth corporate plan which is expected to assist the authority achieve its revenue collection targets for the two financial years ending 2012, Mr Waweru said the arrangement had also made provisions for the customs union to help project any loss or rise in revenue.

“Every plan that you make must be able to take care of changes that might come up midstream as you implement the plan. This plan has taken the circumstances as they are now. If there are changes that require that we revise the plan or certain aspects of it, then we will take them on board. But what is already in place now has been taken into account,” he stated.

In its third corporate plan KRA’s overall revenue targets for 2006/07 to 2008/09 period were exceeded with revenues growing by 18.2 percent, 20.4 percent and 14.7 percent respectively compared to the targeted growth of 14.6, 10.1 and 11.5 percent respectively. Over 200,000 new tax payers were recruited over the plan period.

Poor economic performance in 2008, (where GDP was barely 1.7 percent and the modest recovery forecast in 2009, the adverse effects of the financial crisis and the lingering effects of post election violence of January 2008 characterise the economy as KRA moves into its Fourth plan period.

Revenue forecasts of the fourth corporate plan are based on the Budget forecasts contained in the Printed Estimates 2009/10 and the budget strategy paper 2009/10 to 2011/12. Total recurrent expenditures are expected to reach sh12.1 billion in 2009/10 and rise to sh14.8 billion in 2011/12. It is estimated that total capital expenditures of sh10.2 billion will be required to implement the plan. This level of resources will not be available under the forecast agency revenues and will need development financing from the Treasury.

In its fourth corporate plan the tax collecting body seeks to achieve revenue targets by rolling over uncompleted revenue mobilization initiatives while pursuing new revenue and compliance initiatives to maturity. It also seeks to minimise customer compliance costs and enhance customer service.

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