President William Ruto on Wednesday announced new measures aimed at enhancing accountability in the use of public resources.
Speaking at State House, the President announced that the government would be undertaking reforms in VAT refunds adding that the current process was opaque.
According to the Head of State, the country was spending close to Ksh400 billion in VAT refunds annually.
Therefore, he noted that it would be prudent to ensure that companies get the right amount of refunds.
“About Ksh400 billion is spent on tax expenditure every year, especially on VAT refunds, a process that is largely opaque, and with limited accountability.
"Within 90 days, I will be working with Parliament to provide a legislative and regulatory framework to make this process transparent, open and accountable with a view to reducing this huge public expenditure and direct savings to the productive areas of the economy," he announced.
VAT refunds are usually made to companies that deal with products that are zero-rated or for tax withheld during the supply of goods.
"VAT refunds are made whereby the registered VAT taxpayers deal with taxable supplies listed under the second schedule of the VAT Act. However, the claim should be on the inputs that are solely used in the making of the zero-rated supplies. Also, the taxpayer has to make the claim within 12 months from the date of the supplies.
"Refund arises from tax withheld by appointed tax withholding agents and the registered person lodges the claim for the refund of the excess tax within twenty-four months from the date the tax becomes due and payable," KRA explained.
On the other hand, he reiterated that the country needed to focus on local production and reduce the importation of goods as a move to boost the economy.
As detailed during the Wednesday address, the newly nominated Cabinet will be focusing on how to improve on local production of goods.
"The Government will also work with Parliament to tighten legislation to reduce and eliminate imports of goods and products manufactured in Kenya so as to promote our value addition, manufacturing and industrialisation program to create both jobs and wealth locally," he added.
