Relief as Treasury clears tax refunds ahead of budget

Treasury Principal Secretary Kamau Thugge. He said some firms had inflated amounts owed, occasioning an audit before payment. [Photo: Boniface Okendo/Standard]

The National Treasury has confirmed that it has cleared all the tax refunds that it owed manufacturers as it gears for tabling of the 2017-18 budget.

Speaking Thursday at a pre-budget press briefing in Nairobi, Principal Secretary Kamau Thugge said the backlog of all refunds, as old as two financial years, have been paid.

“We have finished with the issue of VAT (value added tax) refunds,” said Mr Thugge in response to queries on the matter that had seen manufactures blame the Government for distorting their liquidity positions.

The latest payment, which the PS said ranged between Sh15 billion and Sh18 billion, came hot on the heels of a Sh5.6 billion payment that Kenya Revenue Authority (KRA) paid last October.

In June last year, MPs at the close of the 2015-16 financial year ended the long wait for companies by approving the refunds.

Much-needed lifeline

However, differences over the actual sums of money that was supposed to be wired from the Henry Rotich-headed docket to KRA saw the process delayed. Thursday, Mr Thugge explained that an audit had to be done first.

“We did put a team at Treasury to verify whether indeed all the refund claims were real and we were actually able to reduce that figure significantly from Sh30 billion to a range of Sh15 and Sh17 billion” he said.

With KRA having rolled out online systems, the refunds were easily undertaken. KRA Commissioner General John Njiraini had said in October that all the claims had to be fully verified to avert paying fictitious firms or individuals.

This means that in the absence of a proper audit, the Government could actually have lost about Sh15 billion of tax payers’ money to dubious claimants.

Many companies had cried foul over the delay with some manufacturers saying that the Government was “frustrating the very cow that was providing the milk.” The refunds, some having been delayed for over two budget years, could, therefore, not have come at a better time and as they have given most cash-strapped firms a much-needed lifeline.

The payment is in line with KRA’s promise last year in October that it would do so before the end of the current financial year.

Having rolled out itax – an online portal that allows for registration of taxpayers – payment of tax and even processing refunds, KRA says the problem of delayed refunds will be a thing of the past.

The portal now allows it to process about Sh1.2 billion in tax refunds every month since refunds take between 60 and 90 days.

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