KRA Blocks Its Staff From Processing VAT Refunds; Scandal Behind It Explained

Hello Moneymakers, Washington here. In this newsletter, we are covering an audit report that has seen KRA bar 475 members of its staff from processing VAT refunds. We also look at the new visa rules affecting Kenyans looking for work and schooling opportunities in the UK.

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475 KRA Officials Barred From Processing VAT Refunds

475 KRA officials have been barred from approving applications for VAT refunds following an audit undertaken by the taxman.

According to a report by the Business Daily, KRA discovered notable discrepancies in VAT refunds, as it was revealed that some businesses were using loopholes to file fraudulent claims for refunds.

For instance, the audit exposed that some of the businesses had not engaged in any trade but created false transactions to seek refunds from KRA.

According to the audit, the taxman was losing close to Ksh2 billion monthly through the fraudulent claims.

While it was not established that the 475 officials colluded with the businesses, there have been suspicions that some business entities may be colluding with some officials to process their claims.

“The authority to approve VAT obligation applications has been significantly restricted, reducing the number of staff with this role from 645 to 170. This measure is designed to improve oversight and reduce opportunities for fraudulent registrations,” the Business Daily quoted the KRA report.

"At registration, we have reviewed and tightened the VAT guidelines relating to the addition of VAT obligations. This includes enhanced physical verification checks and more rigorous taxpayer due diligence to ensure legitimacy before registration.”

‍UK Visa Changes for Workers and Students 

The UK government announced that it was abolishing the social care visa, which foreigners, including Kenyans, used to get caregiving jobs in the UK.

As detailed in the new policy, the caregiver's jobs will be reserved for locals, given that the UK government has noted several abuses of the visa.

"In line with our wider reforms to skills thresholds, we will close social care visas to new applications from abroad. For a transition period until 2028, we will permit visa extensions and in-country switching for those already in the country with working rights, but this will be kept under review," read the document in part.

Equally, the UK is also reducing the allowance period that foreign students have to stay in the UK after completing their studies.

Under the new policy, graduates will only be allowed to remain in the UK after their studies for a maximum period of 18 months.

"The Government will explore introducing a levy on higher education provider income from international students, to be reinvested into the higher education and skills system. Further details will be set out in the Autumn Budget," read the policy in part.

Also Read: Everything You Need to Know About Tax Refunds in Kenya

‍Gov’t Pushed to Reduce Turnover Tax and Introduce Tax Holiday

The Kenya National Chamber of Commerce and Industry (KNCCI) has called on the government to reduce the turnover tax rate from the current 1.5 per cent to 0.5 per cent.

As reported by the People Daily, KNCCI President Eric Rutto expressed that the move would help small businesses that are affected by the tax.

He noted that the reduction would help the government widen the tax base as businesses grow and create more jobs for Kenyans.

On the other hand, KNCCI also recommended the introduction of a two-year tax holiday for start-ups.

"We have studied the Indian economy for start-ups, and we want fast-tracking of the start-up bill. So, if you give us those tax holidays, two things will happen, one, growth, secondly, you will formalise the SMEs," he stated.

‍Businesses Offer Gov’t Alternative for Ksh600B Pending Bills 

KNCCI has called on the national government to float a bond to pay off the over Ksh600 billion debt owed to suppliers 

The country’s Chamber of Commerce noted that the move would help pump money into the business, a move that would see businesses grow and create opportunities for others.

‍Business Daily reported that KNCCI was also supporting the move, given that many businesses that supply goods to the government were facing cash flow issues because of the outstanding debt.

Govt Fires Board of  3 Sugar Companies

President William Ruto has revoked the appointment of 3 board chairpersons.

The three were John Nyambok (Chemelil Sugar Company), Jared Odhiambo Opiyo (South Nyanza Sugar Company Limited), and Alfred Khang’ati (Nzoia Sugar Company Limited).

Meanwhile, Agriculture Cabinet Secretary Mutahi Kagwe have revoked the appointment of 23 individuals who were serving as board chairpersons and members of three sugar companies.

‍Nairobileo.co.ke added that the firings came at a time when the government announced the companies' leasing.