Sixty-one per cent of all active Value Added Tax (VAT) registered tax payers have been onboarded onto the new Tax Invoice Management System (TIMS) and its electronic version (eTIMS) with the Kenya Revenue Authority (KRA) looking to increase tax collections by 45.0 per cent upon full on board.
According to data from KRA’s Deputy Commissioner for Policy and Tax Advisory, Esther Wahome, 76,219 tax payers have been onboarded out of which 3,656 are on eTIMS whilst 72,563 are on TIMS out of a collective pool of 124,182 active VAT tax payers.
“The roll out of TIMS enables VAT registered taxpayers transmit tax invoices on real time or near real time basis. The full roll out of eTIMS is expected to increase VAT collection by 45 per cent and account for 7.0 per cent of Gross Domestic Product”, Wahome says.
Over the last five years, KRA has collected an average of Sh433.0 billion in revenue through VAT every financial year. An increase of 45.0 per cent as envisioned by the authority following the migration from Electronic Tax Registers to TIMS implies that authority targets collecting at least Sh628.0 billion through this tax head every financial year.
According to the 2023 Budget Policy Statement, the National Treasury targets trimming the country’s VAT collections gap from the current 38.0 per cent to 19.0 per cent in the next financial year. This implies that the government is looking to reduce the collectable VAT revenue foregone from the current Sh276.0 billion average every year to Sh138.0 billion.
“Factors undermining VAT Performance are fictitious claim of input VAT (the missingtrader scheme); misuse of debit and credit notes; as well as under-declaration or misdeclaration of sales”, Wahome says.
On May 15th, KRA published a notice directing that effective June 1st, 2023 all VAT registered tax payers will be required to accept only electronic tax invoices from registered tax payers in compliance with the VAT (Electronic Tax Invoice) Regulations of 2020. Similarly, the Authority has directed that settlement of VAT refunds will only be done in compliance with the regulations. This means that effective June 1st, claiming of input VAT will only be accepted for claims generated based on receipts from TIMS generated receipts.
KRA is tightening its scrutiny of new claims on settlement of VAT refunds even as it settles the existing backlog.
“The amount of outstanding VAT refunds as at the end of April 2023 was Sh43.4 billion consisting of processed claims amounting to Sh12.1 billion, awaiting payment; and claims amounting Sh31.3 billion undergoing processing”, KRA said in a statement regarding VAT refunds.
