The Treasury Secretary Henry Rotich has proposed a cut of the rate of withholding Value Added Taxes (VATs) from 6 percent, to 2 percent in a bid to reduce its impact on cash flow, especially for exempt exporters.
Mr. Henry Rotich said on Thursday in Budgetary proposals that “The implementation of the (Value Added Withholding Tax) system has encountered challenges, the major one being a build-up of huge credits, yet the law does not provide for refund of the same to the taxpayers,”.
The Treasury Secretary added that “In order to address these challenges, I propose to reduce the rate of VAT Withholding from six per cent to two per cent. This will not only help reduce the build-up of VAT refunds, but will also help enhance the cash flow of our business community and stimulate economic activities and job creation.”
According to Business Daily the lack of an appropriate law, has prevented companies from lodging withholding VAT claims.
This led to an accumulation of refunds since September 2017 and also created a cash crunch for some firms, especially those in the export business.
In an estimate by the Kenya Association Of Manufacturers (KAM) in April 2019, the value of withholding VAT had crossed 2.68 billion Kenyan Shillings by August 2018.
That estimate has since gone up.
Through the Statute Law (Miscellaneous Amendment) Bill 2019, the Treasury is also seeking approval from legislators to empower the Commissioner of Domestic Tax to allow withholding VAT to “be applied against any tax payable under this Act”.
The brief memorandum accompanying the bill read that “The Bill seeks to amend the Act to provide for a taxpayer to apply any withheld tax to his credit to offset any other tax liability due from the taxpayer,”.
