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{
    "id": 1590421,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1590421/?format=api",
    "text_counter": 351,
    "type": "speech",
    "speaker_name": "Molo, UDA",
    "speaker_title": "Hon. Kuria Kimani",
    "speaker": null,
    "content": "Just to demonstrate, if a manufacturer is manufacturing this bottle of water, there are costs involved in the plastic container and the electricity bill that are vatable. Therefore, the final outcome of this like the water, is vatable. That means that if this product was zero-rated, then the manufacturer is allowed to claim the amount of tax they spent on their inputs. Whereas in exempt, although there is no VAT in an exempt product, they are not allowed to claim the amount of tax they spent as input in manufacturing of that particular item. This is why ideally, a zero-rated product is meant to be cheaper than an exempt or a standard product. However, tax expenditure is when you allow claiming of input VAT, and it means that this is foregone tax by the government. That where your input tax could be higher than your output tax, you should go to KRA and ask for a refund. But there is a challenge with this and that is why you can see a deliberate effort by The National Treasury in trying to clean up the First and the Second Schedule of the VAT Act; which is our zero-rated products and exempt products. The challenge is that we have very many fictitious claims of input VAT. Where we have some entities that employ more accountants than the officers who actually run it. For example, in hospitals you find … I do not want to give an example of a particular institution. That would be to dispatch them. But you have seen institutions that are manufacturing X product but the number of accountants they have in that business is more than anyone else. All they do is process refunds for VAT. Another issue is that the budget that we provide in The National Treasury and through KRA for those refunds is only Ksh5 billion, against a demand of excess of Ksh50 billion at any particular time. That also creates a loophole, because how do you determine who gets refunded and when? The ideal situation in future for the products that we must protect, is probably to introduce a lower VAT rate of maybe around two, three or four per cent, so that we do away with this issue of zero-rating. However, this Bill has now provided for a recourse where Kenya Revenue Authority (KRA) is able to satisfy itself that a particular entity is misusing a product that is supposed to be zero-rated or exempted from Value Added Tax (VAT). In such cases, there is a penalty for it. Another good example is one of the debates we have had even with you, as a Member of our Committee on zero-rating of the transportation of sugarcane in sugar belt areas. This is a very huge cost to these particular areas. When you zero-rate it, you allow them to claim that fuel, for example, used by the tractor. How do you verify that it was used for the transportation of sugarcane? What if that fuel is bought and ends up supporting other activities, but it is said to have been used for transportation of sugarcane? Those are the complications we deal with products which are exempted from VAT. This is what accounts to tax expenditures. I hope I have explained to you, Hon. Temporary Speaker. Clause 52 of the Bill proposes to grant KRA broad access to personal data for tax compliance purposes. This includes access to trade secrets and confidential customer information. The Committee thoroughly scrutinised this provision. After extensive public engagement and consultation with stakeholders, we found that this proposal fails to meet the constitutional standards set under Article 31(c) and (d) of the Constitution of Kenya, which guarantee the right to privacy. The Committee also noted that Section 51 of Data Protection Act sets out clear and limited grounds under which access to personal data may be exempted from certain protections. Furthermore, Section 60 of The Tax Procedures Act already provides the Commissioner or an authorised officer with sufficient powers to obtain necessary information for tax administration, subject to a court-issued warrant. This safeguard strikes a balance between tax enforcement and protection of individuals. The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}