KRA to speed up tax refunds

by Morris Aron

President Kibaki has directed Treasury and Kenya Revenue Authority to speed up value added tax (VAT) refunds.

He also ordered the taxman to clear all pending arrears.

"Treasury and KRA should look into ways of ensuring that no Vat refund arrears buildup in future, and fast-track the process of refunding traders," said Kibaki.

Following the directive, KRA and Treasury have announced they will soon be implementing a new compliance model, that will see prompt taxpayers refunded Vat between 60 and 90 days. The new model will be implemented next month, and is based on a principle that rewards prompt taxpayers by processing their refunds early, instead of waiting until an audit of their tax returns is carried out.

"Traders and companies will be classified as high, medium and low risk, with the low risk firms receiving refunds before returns are audited," said Finance Minister Uhuru Kenyatta.

Firms or traders with a history of non-compliance will not enjoy the incentive.

Before the deal, KRA settled tax refunds on a first in first out basis and all returns were subjected to an audit before approval.