The plan by the taxman to temporarily freeze any payments or disbursements on tax refunds has received the nod of the treasury terming the undertaking necessary until the process is streamlined.
On Feb 28, the Kenya Revenue Authority (KRA) suspended with immediate effect the payment of tax reliefs, which are broadly categorized as exemptions, refunds, waivers, and abandonments.
These categories are usually used by the government to encourage economic activities and help attract investments in the country.
“The administrative measures undertaken are aimed at ensuring that the operational aspects on implementation of the law are streamlined to void eroding the tax base or creating distortions in the economy,” National Treasury Cabinet Secretary Prof Njuguna Ndung’u said.
“It will also ensure fairness, equity and effectiveness in the implementation of the legal tax provisions,” added Prof Ndung’u.
All other tax reliefs or incentives applications clearly provided for in the law will be reviewed in line with the existing laws, Prof Ndung’u explained.
The suspension of the payments in late February caught the industry by surprise and came just days following the shock exit of former KRA Commissioner General Githii Mburu following a leadership shake-up of the agency.
KRA board chairman Antony Ng’ang’a Mwaura noted that the temporary suspension would offer tax policymakers space to audit and assess the current tax relief processes and procedures.
“The suspension of the tax relief follows concerns from taxpayers, initiating the need to restructure rules and procedures governing tax exemptions,” Mr Mwaura said in a press statement.
KRA added that it grants roughly Kes122 billion in tax reliefs every year, translating to Kes610 billion worth of payments in the last five years.
In the day-to-day execution of business tax refunds, which cover value-added tax (VAT), income tax, excise, and stamp duty, are made to reimburse excess tax paid or remitted in error within a set period of time.