The government has been urged to review the taxation formula for private security companies.
In a memorandum presented to the Kenya Revenue Authority (KRA), Protective Security Industry Association (PSIA) argues that the government is overtaxing its members due to the way the tax regime is structured.
The association’s chairman, Cosmas Mutava said the current model has led to high operating costs for the firms. He argued that some of their clients pay late, yet every month KRA expects them to pay taxes without delay.
“The guarding companies pay the wages and 16 per cent VAT while we wait for the payment. Some customers pay after 30, 45, 60, 90, some even after 120 days,” said Mr Mutava.
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In addition, he said, some clients terminate the services of private guards without paying for the services yet the taxman still expects payment from the date the invoice is raised, even if it is yet to be settled.
PSIA therefore suggests that VAT should be paid only when the client makes actual payment to the security company. On the same note, the association is rooting for its members to pay tax only after the client has cleared the bill.
Mutava also called for a change in the taxation of the service to have tax levied on what remains after the guards have been paid.
PSIA proposes that VAT should not be charged on the gross amount paid by the clients but instead after salary deduction since employees are still charged Pay As You Earn (PAYE) which, the association insists, is double taxation.
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“Kenya should borrow a page from the Phillipines, particularly Curzon City, where VAT is charged on the difference between the values less the labour cost,” said Mutava.
The association also called on the government to allow them to pay corporate taxes instead of VAT, just the way banks, schools and other corporate bodies do.
Security being a critical sector, the association asked for zero rating of security equipment, which currently attracts 16 per cent VAT.