New KRA export guidelines still raw for execution
BY BETTY MAINA
The issuance of Kenya Revenue Authority (KRA) guidelines pertaining to exports subject to zero rating, refunds and rebates published over a week ago in two local dailies was precipitated.
Tied to compliance with these procedures is the payment of refunds and rebates to exporters, a matter in which KRA has proved grossly inefficient. According to recent estimates, the agency owes the private sector Sh25 billion in tax refunds.
The result? An avalanche of complications.
Companies’ bear the burden of paying taxes while KRA continues to hold on to legitimate tax refunds. To stay afloat, they are forced to borrow bridging finance from banks at high interest rates and this extra cost is inadvertently passed on to the consumers, increasing the cost of goods and rendering Kenyan products uncompetitive on the international markets.
To deal with corruption, KRA is implementing a new online export management system to automate the export process, provide proof of shipment and cut down on tax evasion. Laudable as it is, the system fails on a number of levels. KRA has not tackled the teething problems raised during a meeting with industry stakeholders last month. Exporters on the pilot roll out of the system say it is still not fully functional and they cannot access it. The compliance notice therefore came as a surprise since the issues were still unresolved.
Another point of contention is the online release report generated by the Simba system and endorsed at the points of loading and exit. There is a major concern that custom officials could cause unnecessary delays given that KRA officials are the only ones who can print the report. Compounding this problem with the online release reports is that no one can compel customs border officials to make entries in the system upon the exit of goods. Kenya Association of Manufacturers would like an evaluation of the border customs process done to ensure endorsements or else these problems will eat into the time gains of automation.
The taxman also obliges exporters to print out a Certificate of Export and other verification documents once goods have exited the border. The export certificate can only be printed out using the KRA system which in turn is, yet again, only accessible by KRA officials. How are exporters to print the document? This just entangles exporters in an inefficient cobweb.
The most problematic measure is the requirement that exporters provide a landing certificate from the import country once goods arrive. A stipulation that would only be practical, albeit with a high level of difficulty of execution, in East African Countries. To require exporters, who are not conversant with the laws of the importing country to produce evidence of the arrival of goods in the importing country is sheer bureaucracy and an unnecessary hindrance to exporters. It points to KRA’s failure to tackle the real problem, a lack of integrity, correctly.
Furthermore, KRA also vaguely refers to a payment receipt that it may request from exporters required without actually indicating what exactly is needed. This matter is ambiguous and should be clarified with exporters to avoid misunderstanding.
KRA should realise that it needs to collect revenue in a manner that facilitates business and in this case, exports. By hindering an enabling business environment, it is shooting itself in the foot. No one debates the ingenuity of going digital. Exporters in the manufacturing industry appreciate the rationale for most of the measures and would like to follow them in an effort to boost the effectiveness of export systems in the country. But clearly there is a need to review them if they are to be implemented effectively. Otherwise, the industrial sector will suffer because KRA has not bothered to enforce its regulations with sufficient resources and efficient frameworks.
(The writer is the chief executive of Kenya Association of Manufacturers and can be reached on firstname.lastname@example.org)