NAVIGATING THROUGH TAX MATTERS IN THE MANUFACTURING SECTOR

The manufacturing sector is a key contributor to Kenya’s Gross Domestic Product (GDP). It is also a major creator of employment. However, it is among the sectors that have been hit hard by the Covid-19 pandemic.   As it strives to recover, the sector can greatly benefit from proper tax planning and cash savings associated with optimised tax compliance.

Additionally, the government has made available certain tax incentives in a bid to promote the vital sector.  Nevertheless,  some  of  its players  are   not   aware  about  how  they can benefit  from  such incentives . Further, recent changes in tax legislation as well as increased compliance scrutiny by the Kenya Revenue Authority, necessitates companies in the manufacturing sector to take a closer  look at their tax matters in a bid to optimise compliance with the tax laws and regulations.

In a webinar that was recently hosted by PricewaterhouseCoopers to discuss tax matters in the manufacturing sector, the firm noted that it is imperative for companies in that field to rethink their perspective on tax compliance. Additionally, they should embed tax into their business planning as part of their strategy to survive any economic storm and the attendant disruptions.

 While discussing some of the measures the manufacturing sector can take to weather the current economic storm, Job Kabochi, PwC Africa’s indirect taxes leader, noted that businesses should focus on measures within their control – for instance, ensuring proper record keeping and accurate filing of returns.

In the same vein, Corazon Ongoro, a customs manager at PwC, noted that compliance with customs import and export procedures play a crucial role in keeping tax demands from the revenue authority away.  She further   encouraged the manufacturers to take advantage of available options for faster import and export clearance of goods such as the Authorised Economic Operator (AEO) scheme as a way of increasing efficiency in the manufacturing value chain.

 Notably, the above administrative measures must be complemented by continued fiscal policy conversations with the relevant policymakers. For instance, in comparing the Kenyan tax legislation on input VAT recovery to that of other jurisdictions, for example the United Kingdom, Priya Shah, a senior tax manager at PwC Kenya, noted that perhaps it is time that the Kenyan policymakers rethink the VAT refund formula.  In its current form, the formula restricts recovery of input VAT genuinely incurred for making of taxable supplies.

 How manufacturers and other taxpayers handle their tax obligations is a key success factor for their businesses. It is therefore imperative they  invest in upskilling themselves on their obligations and rights as enshrined in our fiscal legislation.