NAIROBI, Kenya, Feb 27- The National Treasury has rejected tax exemptions for the Standard Gauge Railway’s support facilities proposed in the Business Laws (Amendment) Bill, 2019 currently before parliament.
Treasury Cabinet Secretary Ukur Yatani says such a proposal would lower the amount of revenue collected, at a time when the government is striving to widen its tax base.
Yatani made the remarks when he addressed the Finance and National Planning Committee which had met to discuss the Business Laws bill which was approved by the cabinet late last year.
“We have mutilated the VAT and all laws to create as much convenience as possible and this has affected the amount of revenue we are collecting,” he said.
Yatani told the committee that his department had already given such exemptions to business operators in several sectors.
“The exemptions have been increasing without any justifiable means sometimes, we have made all levels to cut on the exemptions which have eroded our ability to collect more,” he adds.
The Bill proposes to amend the First Schedule of the Value added tax Act, 2013 to exempt taxable supplies and services procured locally or imported to construct bulk storage and handling facilities.
It requires a minimum capital investment of Sh10 billion and a minimum storage capacity of 100,000 metric tonnes, in support of the Standard Gauge Railway operations.
His recommendations come at a time when the treasury has been pushing the Kenya Revenue Authority to widen its tax base to reach Sh1.7 trillion targets for the 2019/2020 financial year.
As of December 2019, the tax collector had pocketed returns worth Sh628 billion projecting a miss in the collection.
KRA has also blamed the treasury on delayed Sh1.2 billion VAT refunds to manufacturers to late allocations by the National Treasury.
KRA Deputy Commissioner Department for Domestic taxes Caxton Masudi said the process has been slow despite revising down days for the refunds and has approached the CS Treasury to ensure the payments are done on time.
The tax collector has so far managed to pay Sh20 billion of VAT refunds, in the 2019/2020 financial year.
Manufacturers had last month called for timely refunds which would ease cash flow problems for struggling businesses amid a persistent credit crunch to the sector.
The players said the delay was crippling their businesses.