The Kenya Revenue Authority (KRA) has flagged a scam in which firms registered to collect Value Added Tax (VAT) on its behalf are increasingly falsifying invoices and under-declaring transactions.
According to KRA Commissioner of domestic taxes Elizabeth Meyo, firms are increasingly using import entry and purchase invoices more than once to keep the taxman off their transaction trails.
Others under-declare outputs or overstate inputs, falsify credit notes while others simply withhold VAT credits without declaration of corresponding sales.
Under the VAT Act 2013, it is mandatory for all registered taxpayers to make “full and accurate disbursement of all taxable transactions.”
“Registered VAT taxpayers are notified that failure to submit a correct declaration or falsifying information is a criminal offence,” Mrs Meyo said yesterday in a public announcement.
The KRA is under pressure to meet its revenue target with figures published on Friday indicating that it had collected Sh897 billion by end of January against a revised annual target of Sh1.704 trillion expected by June. “All VAT credit claims are being subjected to a validation process and any inconsistencies are being disallowed,” Mrs Meyo said, adding the taxman has been losing millions of shillings through such schemes.
Last month, the taxman established a special unit to handle verification and payment of tax refunds amid growing pressure from the private sector.
KRA says "dedicated unit" will speed up the processing of refunds in line with President Uhuru Kenyatta’s directive to State entities to clear arrears within three months.
The taxman has over the years struggled to clear VAT refund claims arising from zero-rated supplies, with the bills standing at Sh26.2 billion last September.Lengthy verification process amid inadequate cash provided by the Treasury has traditionally delayed processing and payment of VAT refunds.