In correspondence between foreign missions seen by Capital FM News on Tuesday, the US Embassy said that the United States Agency for International Development (USAID) could be forced to suspend the provision of aid.
The mission argued that the US Congress had directed that 200 percent of any assistance taxed be withheld from appropriations the following year.
KRA has been imposing a 1.5 percent levy on aid which the American Embassy argued is in violation of international agreements.
“US government assistance is exempt from taxation under our bilateral Development Assistance Grant Agreements and the US bilateral agreement,” read the message.
“US law strictly prohibits taxation of US foreign assistance.”
The American Embassy also claimed that the levy imposed by KRA would require funds equivalent to the treatment of 10,000 HIV patients.
It further claimed that the Sh13.1 million being demanded by KRA for damages as well as a further Sh4.8 million for the taxation of anti-malarial drugs could cater for the treatment of 147,000 malarial patients.
“While waivers and letters of exemption will solve the short term issue, a durable solution that recognises the permanent exemption of development, humanitarian and security assistance from taxation and duties is needed,” urged the communication.
The Embassy further faulted the taxman for not enforcing a tax exemption by the National Treasury on all food aids saying essential food aids continued sitting at the Mombasa Port.
“Due to KRA holding 43,000 metric tonnes of food aid provided by the World Food Programme, there has been a serious reduction in refugee rations in Dadaab this month,” said the Embassy.
The Embassy further claimed that KRA was holding up front line drug treatment for 300,000 HIV positive adults and 50,000 HIV positive pregnant women.
It also alleged that the taxman was holding up 2,100 pieces of maternal and newborn health equipment destined for clinics around the country in support of the free maternity services.
“The KRA is holding up CD4 HIV testing reagents for 100,000 individuals; Kenya will soon run out of reagents. Also KRA is currently holding first line antiretroviral drugs for 200,000 individuals. The supply will run out in fewer than three months,” read the communication.
According to the Embassy, KRA is also delaying the use of HIV testing equipment for two million individuals.
The Embassy further explained that KRA’s move to tax the aid had forced USAID to delay the shipment of 50,000 treated mosquito nets.