Treasury PS Kamau Thugge says payments for the refunds could also be staggered through the annual budget estimates.
The Treasury plans a second supplementary budget to help clear the Sh7.2 billion backlog of tax refunds, offering relief to firms facing cash flow problems due to the delays.
Treasury principal secretary Kamau Thugge told the National Assembly committee on Finance, Planning and Trade on Thursday that payments for the refunds could also be staggered through the annual budget estimates.
Businesses complain that tax is the number one issue that pushes up the cost of doing business, citing by Kenya Revenue Authority’s (KRA) delays in refunding value added tax claims.
“We are coming up with modalities to extinguish the issue of Value Added Tax (VAT) refunds which have been with us for a while,” Dr Thugge told the MPs who wanted to know when the KRA will refund tax due to companies and individuals.
The Treasury has in the past blamed a huge backlog of billions of shillings in unpaid tax refunds on people who make false claims.
“The VAT refunds initially were estimated at Sh30 billion but when we set up a team at the Treasury to examine each claim, that figure was reduced to nearly half,” Dr Thugge said. The Kenya Association of Manufacturers (KAM) has welcomed the move saying it raises optimism in the sector, especially for firms that have borne the pain of delays.
Through the new automated i-Tax system, KRA generates the withholding tax almost immediately because it is automated.
The new regime demands a business must lodge a VAT refund claim within 12 months as opposed to the former system that could run for three years leading to the backlog.
Dr Thugge said KRA has been making refunds and current claims stand at Sh7.2 billion.
“This is the amount that is outstanding. We intend to finance payment of this amount either through a second supplementary budget or stagger it over the financial years,” Dr Thugge said.
Dr Thugge had been invited by MPs to present the highlights of his ministry’s budget for the 2016/17 financial year.
Dr Thugge was put to task to explain measures that have been taken to ensure that KRA collects revenue based on set targets.
“Over the last three years, we have seen a trend where revenue is underperforming hence hitting on the expenditures. Is it that you have given Kenyans an over ambitious budget that has resulted in growth in national debt? What are you doing to ensure that you close the gap between revenue collection and spending,” Daniel Nanok (Turkana West) said.
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