In a recent meeting with a delegation from the International Monetary Fund (IMF), the Kenya Association of Manufacturers (KAM) has highlighted critical concerns, including the prolonged delays in Value Added Tax (VAT) refunds, taxation challenges, regulatory burdens on manufacturers, and the instability of the US dollar in the market.
KAM emphasized that the unpredictable availability of the US dollar poses a significant obstacle for manufacturers, impeding their ability to meet import payment deadlines promptly. This, in turn, disrupts the timely procurement of raw materials essential for production, leading to interruptions in manufacturing schedules. As the local industry relies heavily on raw materials, intermediate goods, and capital goods, the stability of the US dollar is paramount for maintaining a smooth production flow.
This plea from KAM comes amid the Kenya Revenue Authority’s (KRA) efforts to implement new regulations. These regulations will mandate all businesses to issue electronic tax invoices, a move aimed at enhancing transparency and efficiency in tax compliance. Businesses failing to comply with this requirement risk facing penalties, equivalent to twice the tax amount due.
The proposed regulations align with KRA’s broader strategy to gain comprehensive visibility into the stock movements of businesses and cross-verify these movements with the corresponding electronic receipts. Even businesses not registered for VAT will be obligated to generate and transmit their tax invoices electronically to KRA through the electronic Tax Invoice Management System (eTIMS). Starting from January 1, 2024, the Authority asserts that any business expenditure lacking support from an electronic invoice will be ineligible for tax deductions.
As discussions continue between KAM and the IMF team, manufacturers anticipate positive developments that will address these concerns and foster a conducive environment for sustained growth and productivity.
