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By:
Peter Mburu | |||||||||
| Posted:
Feb,28-2023 19:51:58
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The Kenya Revenue Authority (KRA) has suspended all tax reliefs effective immediately.
In a statement released just days after a management purge forced out Commissioner-General Githii Mburu and other top bosses, board chairman Anthony Mwaura, who also served as UDA's National Elections Board chairman, said the move was informed by growing concerns from Kenyans about how tax reliefs and exemptions were governed.
“In the past five years, KRA has granted tax reliefs and incentives totaling Sh610 billion, with an average of Sh122 billion per annum. The move to suspend payment of tax reliefs allows KRA to audit and enhance the tax relief processes and procedures,” KRA stated on Tuesday.
The move is among measures being taken to seal revenue leakage and minimise tax expenditure, which is the income the government foregoes in order to achieve certain objectives. For instance, the government zero-rates or exempts products from paying some taxes to cushion consumers from high prices, or to incentivise a sector for investors to come in.
“The current suspension and ongoing review of tax reliefs is also aimed at increasing the impact of tax expenditure on economic growth. This will be achieved through minimising tax expenditure and aligning it with international best practices for better internal revenue,” KRA stated, adding that payments will not be made until the end of the audit process.
The suspension effectively halts payments to businesses such as tax refunds, exemptions, waivers and abandonments.
Treasury seeking value for money
The move comes barely two weeks after the 2022 Tax Expenditure Report by the National Treasury indicated that Kenyan taxpayers forewent Sh316 billion revenues in 2021, with businesses in the financial, transport, manufacturing and communication sectors benefitting most from government’s tax expenditure in recent years.
In the report, Treasury said it was considering reviewing the list of products that were enjoying waivers in order to “rationalise and harmonise” tax expenditures and ensure value for money.
“To ensure sustainability and value for money from the resources foregone through tax expenditure, the government will continue to upscale efforts to rationalise and harmonise the tax expenditure with the aim of removing redundant tax expenditure and enhancing those intended to promote investments and for social protection,” Treasury Cabinet Secretary Njuguna Ndung’u said at the time.
KRA’s move to temporarily abolish waivers also comes at a time when there are claims that senior government officials in the previous administration may have enjoyed tax waivers unfairly.
“It is also part of the aggressive revenue mobilisation planned aimed at enhancing revenue collection and redirecting resources to finance priority growth-supporting programmes. The move is aimed at powering the Bottom-Up Transformation Agenda (BETA),” KRA stated.
The 2022 Tax Expenditure Report revealed that while the financial and insurance, information and communication, and manufacturing sectors enjoyed highest tax exemptions in 2020 and 2021, the transport and energy sectors were also largely zero-rated.
It showed that between 2017 and 2021, the government has reduced the rate of waivers, with tax foregone reducing from Sh357.8 billion to Sh316 billion. The amount had hit a low of Sh267.1 billion in 2020, but went up in 2021.
In the five years to 2021, Value Added Tax (VAT) on products consumed in the country enjoyed highest rates of tax expenditure (zero-rating and tax exemptions), of between Sh172 billion and Sh272 billion annually.
This was followed by excise duty on domestic products, whose tax expenditure ranged between Sh30 billion and Sh49 billion, while tax expenditure on corporation income tax ranged between Sh17 billion and Sh22 billion.
VAT on fuel imports also enjoyed between Sh9 billion and Sh28 billion waivers annually between 2019 when tax expenditures on the product was introduced and 2021.
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Source:
Nation Media Group
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