This archive report was first published on 11 July 2019.
On July 11, 2019, the Kenya Revenue Authority (KRA) released Sh14.2 billion in tax refunds owed to numerous companies in the country.
This significant move was welcomed by the Kenya Private Sector Alliance (Kepsa), which had been lobbying for the payments.
According to Kepsa chief executive Carole Kariuki, the KRA confirmed that tax refund payments amounting to Sh14.2 billion were paid out between July 2018 to June 2019, with Sh11.1 billion paid out in the last quarter of the Financial Year 2018/2019 (April-June 2019).
Ms. Kariuki expressed optimism that the balance from the whopping Sh56.9 billion pending for the past five years would soon be cleared, giving Kenyan businesses a much-needed impetus for expansions, factory upgrades, and new hirings.
She noted that refunds owed to manufacturers amount to Sh20 billion, which if paid, would spark an annual growth of Sh50 billion in turnover, resulting in Sh6 billion in VAT collections, Sh1 billion in corporate and income taxes, and the creation of 20,000 indirect jobs.
Companies had previously lamented over cash flow challenges, citing delayed tax refunds that forced them to scale down production and impeded planned expansions necessary to face off incoming competition following the activation of the Africa-wide Free Trade Area.
Delayed disbursement of refunds also forced companies to take costly bank loans to fund operations, leading to high input costs that were eventually transferred to consumers.
Yesterday, Ms. Kariuki said the tax refunds, coupled with the reduction of withholding tax from six to two percent, would help reduce input costs, making processed goods more competitive in local and global markets.
She added that regular meetings with senior technocrats had helped thaw the icy relationship between the private and public sectors, with an inter-sectoral team formed to validate the VAT refunds claims.
