No quick end to tax refund delays, says KRA Commissioner-General

By Morris Aron

Businessmen will continue experiencing tax refund delays after news that the taxman is yet to increasefunds set aside to settle such claims.

Mr Michael Waweru, Kenya Revenue Authority (KRA) commissioner general said the taxman has a window of only Sh1.180 billion per quarter to pay tax refund claims.

KRA said that it will continue settling tax refunds on a first in first out basis meaning applications are processed based on a priority of time irrespective of urgency or scope.

"The reason why we have been experiencing the delays is because KRA cannot surpass the budget it has allocated for refunds," said Mr Waweru.

Tax refunds has been an emotive issue with traders accusing KRA of being quick to collect tax, but slow in refunding excesses exposing companies to liquidity constraints.

Tax experts say persistent delays in tax refunds from KRA puts firms in a liquidity squeeze.

Mr Harveen Gadhoke, the partner in charge of advisory services at Deloitte Eastern Africa, was recently quoted saying such delays mean cash flow in companies affected will continue to remain tight because of reduced access to capital as the Government crowds out the private sector in the debt market.

Oil marketers recently joined the growing list of firms requesting KRA to issue tax refunds on time saying delays were increasing the cost of doing business.

Increase effeciency

Kenol Kobil said it had witnessed prolonged delays in tax refunds, sometimes rising to more than Sh1 billion.

Cases of tax refund delays, especially those which have audit queries taking more than five years to settle have also been reported.

Hope now lies in the steps being undertaken by KRA to streamline tax refund process and a number of proposals outlined in this year’s budget. Finance Minister Uhuru Kenyatta announced plan to increase the registration period for VAT refunds from 30 days to 90 days to save new businesses from losses after failing to meet KRA deadlines in making refund claims for stocks and assets.

Uhuru also zero rated for VAT any goods and services supplied to a number of exporters — meaning any person or company supplying the gazetted exporters with a service or goods is zero rated (does not pay) VAT.

KRA on its part promises to increase efficiency in the tax refund process. "We will continue to evaluate our operations with an aim of increasing efficiency in tax refunds by addressing administrative challenges in line with our operations strategy," said Mr Waweru.