Kenya to overhaul tax system

October 15, 2009
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, NAIROBI, Kenya, Oct 15 – Treasury is looking to overhaul Kenya’s tax system by the next financial year, Finance Minister Uhuru Kenyatta announced on Wednesday.

This follows intense lobbying from the private sector over the slow pace of tax refunds in the country. Mr Kenyatta revealed that Treasury had already established a tax harmonisation task force, to draft the best possible route to take.

He was speaking during the fourth Prime Minister’s round table with the private sector.

He said the new system would ensure the efficiency and easy implementation of a user-friendly tax regime.

Kenya private sector alliance KEPSA Chairman Patrick Obath reported that the private sector is currently owed an estimated Sh6 billion in VAT refunds by the government.

“This has severely starved us of much revenue to finance expenditure,” Mr Obath said and took the opportunity to appeal to the government to reduce the number of days for clearance of VAT refunds.

“60 days to clear is just too long. I appeal that this should be reduced to around 30 days,” he said.

Mr Obath has in the past described Kenya’s tax system was the “least investor friendly” making a number of foreign investors to shy away from Kenya.

The Finance Minister said Treasury would be working with the Kenya Revenue Authority to develop a three-tier system that will ensure companies are refunded according to how they also pay their taxes.

“What we are proposing to KRA, is to develop a green channel for those who are known to be reliable taxpayers who can be paid in advance while the audit is done at the tail end, another one for those who are in between being non-performers to becoming active performers.  The last one for those who are known to be in the red,” Mr Kenyatta explained.

At the same meeting, Prime Minister Raila odinga has directed all government ministries to formulate ministerial stakeholder forums with the private sector.

This follows revelations by the Kenya Private Sector Alliance that a number of ministries were lagging behind in facilitating working relations with the private sector.

“This will facilitate close ties to create an enabling environment for private public partnerships to be developed, he said.

The premier assured the private sector that government was reviewing the public sector stakeholders’ partnership framework that will lead to the adoption of recommendations from the Ministerial Stakeholders Forum.

“The implementation of this policy will allow a structured engagement on all areas of concern to the private sector,” he said urging both parties to forge close working relations.

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