NG-CDF Tax arrears owed to KRA

Cabinet Secretary for the National Treasury John Mbadi before the National Assembly's Education committee chaired by Eve Obara to consider budget implementation in the education sector and also to respond to statements sought by Members in the House at Mini- Chamber, County Hall. July 24th,2025. [Elvis Ogina, Standard] Treasury Cabinet Secretary John Mbadi has said that the National Government Constituency Development Fund (NG-CDF) owed the Kenya Revenue Authority (KRA) Sh2.4 billion in tax arrears as of the end of October. He said KRA, as of October 30, received payment plan requests from seven NG-CDFs-namely Kilifi North, Makadara, Kaloleni, Thika Town, Lungalunga, Magarini and Ugenya-for taxes due of Sh11.3 million. The CS said that more payment plan applications and tax objections are expected this month, adding that as of October 30, KRA had received formal tax objections from 21 NG-CDFs for tax assessments amounting to Sh412 million. Mbadi made the remarks when he appeared before the National Assembly Committee on Finance, chaired by Molo MP Kuria Kimani, to respond to questions on the total outstanding and disputed tax arrears based on the most recent audited financial statements. The CS explained that the last meeting between KRA, select CDF fund account managers and the NG-CDF Board was held on September 16, where concerns were raised that KRA assessments might be incorrect as they were based solely on financial statements, which do not accurately reflect project execution timelines, a factor that could affect the tax position. "NG-CDF contended the tax charge against the entire amount of committee expenses without due consideration of tax allowable versus non-allowable deductions," Mbadi told the MPs. But Mbadi said the KRA explained that tax assessments are usually based on multiple documents and not just financial statements and, as such, are specified upon issuance of the notice of assessment. Under circumstances where a taxpayer does not provide the documents as requested, KRA is limited to using data drawn from the financial statements, as was the case for the CDF tax compliance checks. Also, during the September meeting, Mbadi said that NG-CDF contested the arrears, citing a lack of awareness and understanding of the basis for the tax demands, but KRA insisted that tax arrears legally due remain enforceable by law. Mbadi told the committee that the KRA, through its Public Sector Division (PSD), carried out compliance checks on various NG-CDFs in 2020 to establish tax compliance levels. Following the exercise, KRA identified and assessed tax liabilities amounting to Sh1.8 billion and initiated revenue collection efforts in accordance with the standard procedures as guided by the law, including enforcement measures. He said that KRA held various engagements with the Parliamentary Select Committee on NG-CDF and the National Treasury in a bid to collect the tax arrears, and in December 2020, it was agreed by all parties to suspend all tax enforcement and recovery measures to allow for more engagements between the stakeholders, aimed at resolving the outstanding issues. The CS also said that the meeting agreed on a way forward, which included that tax assessment amounts not in dispute-including Sh527.5 million self-assessment in the current debt category for the period after September 2022-NG-CDFs concerned should submit proposed payment plans within a month from the date of the meeting. "Understanding the challenges tied to fund disbursements from the National Treasury, KRA committed to give due consideration to requests for flexible payment plans where difficulty of payment is communicated within reasonable timelines," he explained. To enhance tax compliance levels by NG-CDF and avoid recurrence of the current challenges, Mbadi said that the two entities agreed on the need to ensure the offices committed to adhering to withholding tax obligations. "Successful implementation of these measures will not only address outstanding tax liabilities but also strengthen governance and financial accountability across NG-CDF office operations. The ongoing collaborative efforts between KRA, the NG-CDF Board and the NG-CDF offices mark a significant step towards resolving long-standing tax compliance issues. The agreed actions reflect a shared commitment to transparency, timely reporting and adherence to statutory obligations," Mbadi told the committee. Committee Chairman Kuria said they will call a meeting between KRA and fund managers, represented by the NG-CDF Chief Executive Officer in the affected constituencies, to address issues raised, saying that the National Treasury cannot have a "global answer" for different accounts. The MPs also said there is a need to pay KRA what is rightly due, but proper computation should be ensured for all constituencies.

NG-CDF Tax arrears owed to KRA

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