In the wake of COVID 19, the Government sort to increase the disposable income for both citizens and corporates. One of the measures taken to increase the cash flow was the change in the graduated tax scale for all employees, by exempting all that earn Kes 24,000 and below from taxation i.e. PAYE.
In the same breadth, corporates were not left behind and the Government reduced Resident Companies’ corporate tax rate from 30% to 25%, and even a more Immediate effective change was the payment of VAT refunds and reduction of VAT from 16% to 14%.
In light of this, the Kenya Revenue Authority (KRA) has paid Kshs 25 billion in value-added tax refunds as of June 2020. However, this amount was less than half of the total of claims launched, which is a cumulative Kshs of 62.3 billion.
The Commissioner for Domestic Taxes Elizabeth Meyo said the refunds made in the financial year 2019/2020, is a new high compared to the financial year 2018/2019, which stood at Kshs 14.1 billion. “As at end of the financial year 2018/19, KRA had stock of Value Added Tax (VAT) refund claims worth Sh24.3 billion and has received additional claims worth Sh38 billion in the Financial Year 2019/2020, bringing the total value of claims to Sh62.3 billion as at June 25, 2020,” said KRA on Tuesday.
Photo Credits: Daily Express
“In the 2019/2020 financial year, claims worth Sh36.1 billion have been processed, out of which Sh23.6 billion have been paid out and an additional Sh1.8 billion being earmarked for payment by end of June 2020. This will bring the total tax refund payment in the financial year 2019/2020 to Sh25 billion.
“These refunds would not have been made at a better time than now when most firms are struggling with financial inflows with some even considering closure and total exit from the market. Even with the tax reliefs that were given to the firms, many were deemed ineffective since most firms were already going under and making no revenues. The refund by KRA is therefore a big boost to such firms and could help some of them get back on their feet even as demand for their goods and services recovers from a near depressed state.
It will be interesting to see how these refunds will help salvage businesses/companies in Kenya.
Photo Credits: KRA
Author: Felix Mbaka, Finance and Economics
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