The Kenya Flower Council (KFC) held a lobby meeting with senior Kenya Revenue Authority (KRA) managers to address some of the current issues affecting the industry. The meeting held on Monday February 23, 2015, had a main agenda of addressing challenges with VAT refunds filed both on i-tax platform and manually. We also got a chance to address the recurring shortage of GSP and EUR-1 forms, availability of officers to stamp and sign the forms at the JKIA during weekends and public holidays and possible areas of cooperation with KRA to enhance compliance.
In regard to VAT refunds, the floriculture industry has now been re-designated to a low risk industry after certain levels of confidence were achieved. The industry was commended for the progress in uptake of i-tax, which has greatly reduced the amount of time taken to process refunds. In the last 8 months there has been a lot of effort to pay refunds for the flower industry. About 80% of the refunds for the period Jan 2014 to date have been processed. Claims dating from January 2014 onwards are being handled by KRA while those dating prior to Jan 2014 (backlog) are being handled by treasury. Some delays in VAT refunds are inevitable and some of the reasons include;
- Where all documents/information are not provided or cannot be verified
- Some exporters double filing claims i.e. manually and through i-tax, thereby raising red flags
- If an exporter is indebted to KRA, refunds will not be paid until the outstanding debt(s) is cleared
Regarding shortage of GSP and Eur-1 forms, KRA was working towards a one stop station where the forms will be available for purchase and processed. KFC asked for a permanent solution to this shortage and encouraged KRA to automate the issuance process, similar to the automation of ordinary certificates of origin being handled by Kenya Chamber of Commerce. KRA also assured that there should be officers available over the weekend to process the forms.
KFC was encouraged to take up a seat in the TREO committee to champion its member’s issues. The industry was also encouraged to join the Authorized Economic Operators platform which would offer a green channel with KRA processes for those who had joined.
KFC also attended a meeting between KEPSA and the KRA Commissioner General, Mr. John Njiraini. The Commissioner General reiterated KRA’s commitment to the President’s directive to process Kshs 10 billion worth of refunds by end of February 2015. He reported that claims worth Kshs 9.8 had been processed and sent to treasury for payment. A committee is already in place to validate the claims and KRA is already working to clarify issues raised. He cited challenges identified in the processing of old claims which included the verification of claims mainly those not captured by the Simba system. Another challenge was outstanding tax debts with refund claimants. KRA is working on a strategy to ‘clean its ledgers’ as some of the debts may be wrong. Mr. Njiraini also confirmed that refund claims from traditional exports such as horticulture were now not being subjected to the rigorous audit process. To enhance integrity, KRA has centralized processing of refunds, and that there is a queuing procedure that allows for a 1st come 1st paid basis. Further notifications for audit by KRA must give a reason why the audit is necessary.
KRA is also setting up an internal structure that will see 80% of disputes with tax payers resolved without courts being involved. Apart from being expensive and lengthy, Njiraini said that the court battles were damaging KRA-Client relations.
He added that KRA is working on a unified returns process that will see PAYE, NSSF, NHIF and stamp duty filed together. A piloting with NSSF is expected to take place starting in April 2015. A full rollout is expected to take place in July 2015.