PSV operators during a strike in August. Finance minister Njeru Githae December 6, 2012 said the advance tax on PSVs will no longer be paid in cash, which is susceptible to diversion. Photo/DANIEL IRUNGU
What you need to know:
A new cashless receipting system will be devised and introduced for advance tax so that there is no leakage.
Treasury expects to raise more cash once the VAT Bill is passed into law, removing exemptions and zero-rating on most goods and services.
The Treasury expects to raise the Sh40 billion needed to meet the increased wage bill for public servants by sealing revenue leakages through fake excise stamps on alcoholic drinks and unpaid advance tax by public service vehicles (PSVs).
Finance minister Njeru Githae said the advance tax on PSVs, commonly called matatus, is paid in cash making it susceptible to diversion before it reaches the Kenya Revenue Authority (KRA).
“A new cashless receipting system will be devised and introduced for advance tax so that there is no leakage,” Mr Githae said after signing loans agreements worth Sh13.5 billion with the African Development Bank.
Auditing of large taxpayers for compliance with withholding VAT regime was bearing fruit with collections for October standing at 20 per cent above those for September.
“We have realised revenue increase from the audits of large taxpayers. We are intensifying inspection to ensure that fake KRA stamps are not used in beer and spirits markets,” said Mr Githae. The money is earmarked for the Ethiopia-Kenya power transmission line and equipment for university engineering courses.
Mr Githae said the Treasury expects to raise more cash once the VAT Bill is passed into law, removing exemptions and zero-rating on most goods and services.
MPs, however, have vowed to change some of the provisions of the Bill especially those affecting 20 basic items such as foodstuffs, seeds, fertilisers, processed milk, sanitary towels, milk processing equipment and machinery.
The International Monetary Fund (IMF) estimates that exemption and zero-rating of some 480 items costs the exchequer Sh40 billion. Besides the money, the IMF says the Bill would ease tax administration and improve compliance.
Mr Githae, however, said the Bill is unlikely to be passed this year given Parliament’s congested schedule which has seen priority given to election-related agenda with the polls three months away.
