Retailers clash with KRA on tax system

Supermarket owners claim that the Kenya Revenue Authority (KRA) has rejected billions of shillings in tax input claims over a new automatic value-added tax (VAT) computation system.

The taxman had claimed that inconsistencies between purchase and sales invoices the traders submitted have seen them claim billions of shillings on input fraudulently since the claims are bulky, forcing the taxman to set up the Value Added Auto Assessments (VAA) that retailers are now terming as impractical.

The new system installed in October last year was intended to help nab cases where a seller and buyer file inconsistent returns, curbing claims of inputs from fake invoices.

In a letter to the taxman, the Retailers Association of Kenya says the system is not suited to retailers, especially small ones given the way they file their returns.

The companies say they send their VAT records in bulk after selling to individuals who later make separate claims, which means that records do not match.

“If you are a small business selling textbooks and an individual comes and buys across the counter and they do not tell you they will claim or not and have not given or taken their PIN, when you file you give bulk VAT for the till they will obviously not match,” said Retrak CEO Wambui Mbarire.

“VAA does blind matching for the invoices’ serial numbers, which will always result in mismatches between invoices booked by the seller and the buyer due to the nature of the financial system used on both sides.”

The association called for a crisis meeting with the KRA last Friday, which has been pushed to this week as they seek to iron out issues raised with the implementation of the system.

The taxman has previously defended its use of the automated system to police remittances on grounds that the system had made it easy to flag tax cheats and bring them to book.