The Kenya Association of Manufacturers (KAM) has highlighted critical concerns affecting the manufacturing sector during discussions with a visiting team from the International Monetary Fund (IMF). Primary issues raised by KAM include delays in Value Added Tax (VAT) refunds, taxation challenges, regulatory burdens on manufacturers, and a shortage of US dollars in the market.
One significant focal point emphasized by KAM is the extended delay in the remittance of VAT refunds. The lobby group emphasized that such delays have a cascading effect on the manufacturing industry, particularly impeding the timely procurement of raw materials for processing.
The industry’s dependence on these raw materials and intermediate goods, coupled with a shortage of US dollars, disrupts production schedules and presents challenges for manufacturers.
In a released statement, KAM outlined how the fluctuation in the availability of the US dollar directly impacts manufacturers’ ability to promptly meet import payment obligations. This situation not only affects the procurement of essential raw materials but also hampers the overall production efficiency of the sector.
These concerns arise as the Kenya Revenue Authority (KRA) prepares to implement regulations mandating all business operators to issue electronic tax invoices. Failure to comply with this requirement could result in penalties twice the tax due. The move is part of KRA’s efforts to enhance visibility into stock movements, allowing for cross-checking with presented receipts.
KRA’s notice specifies that all businesses, regardless of VAT registration status, must electronically generate and transmit their tax invoices to the electronic Tax Invoice Management System (eTIMS). Additionally, the Authority warns that any business expenditure lacking support from an electronic invoice after January 1, 2024, will not be deductible for tax purposes.
The articulation of these industry concerns to the IMF team sheds light on the intricate challenges faced by the manufacturing sector in Kenya. The shortage of US dollars and delays in VAT refunds present immediate hurdles requiring concerted efforts from both industry stakeholders and regulatory bodies to ensure the resilience and growth of the manufacturing landscape in the country. As these issues gain attention, collaboration and strategic solutions will be crucial to fostering a more conducive environment for Kenya’s manufacturers.
