Sh621 billion in tax revenue foregone in five years

The government missed out on Sh620.5 billion shillings in tax reliefs and incentives in the period between January 2018 and February 2023.

This is according to a statement by the Kenya Revenue Authority (KRA) tabled before the National Assembly Finance and Planning Committee has revealed.

Of this amount, 65 percent translating to Sh405 billion was attributable to reliefs and incentives related to customs while the remaining Sh216 billion was attributable to reliefs and incentives on domestic taxes.

Among the notable beneficiaries of tax reliefs and incentives in the period under review were Kenya Breweries Ltd (KBL) which was granted Sh8.2 billion in tax abandonment by the National Treasury in January 2021; security agencies including National Police and the Airforce spared Sh4.9 billion in 2020/21; and the Standard Gauge Railway which was spared Sh4.5 billion through Treasury undertakings in 2020/21. Authorized local assemblers of motorcycles were spared Sh1.5 billion worth of taxes in 2020/21.

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KRA has since written to the National Treasury seeking to reverse tax abandonment worth Sh9.2 billion of which Sh8.2 billion is attributable to KBL; Sh612.7 million is attributable to the ICT Ministry; Sh332.0 million is attributable to London Distillers; and Sh38.2 million is attributable to Maendeleo ya Wanawake.

In its submission before the Committee, KRA has defended itself against any wrongdoing in the now controversial June 2019 tax waiver granted to NIC and CBA banks ahead of the merger consummated later that year.

“The import of this provision was that Capital Gains Tax exemption under this paragraph was the sole prerogative of the Cabinet Secretary for the National Treasury and Planning. KRA is therefore not privy to the details of the transaction as exempted by the National Treasury. 

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KRA has formerly written to the National Treasury to review and reconsider the Capital Gains Tax exemption approval granted on NCBA in 2019”, the Authority says in its submitted documents.

On February 6th, 2023 National Assembly Majority Leader, Kimani Ichung’wah, wrote to the National Treasury Cabinet Secretary seeking information on all tax waivers, reliefs, and exemptions since January 2018.

The statement tabled by KRA before the committee revealed that exemptions were the biggest driver of foregone tax revenue between January 2018 and February 2023 accounting for Sh328.1 billion followed by refunds at Sh127.2 billion.       BY DAILY NATION