The National Social Security Fund (NSSF) has endured a 29-year wait for tax refunds from the Kenya Revenue Authority (KRA), bringing to fore the pain taxpayers face when claiming overpaid taxes.
Disclosures by the Auditor-General show that the NSSF has not yet received the Sh904.9 million that it mistakenly paid to the KRA in 1996 and 1997, despite being exempt from paying income tax as a State-controlled pension fund.
KRA has long been criticised for its delays in refunding taxpayers their overpaid taxes or value-added tax (VAT) refunds, denying firms much-needed cash.
“The tax refund due from KRA relates to 1996 and 1997 income tax return amounts of Sh493,257,328 and Sh411,646,389 that were inadvertently paid to the KRA after the Fund had become tax exempt,” Auditor-General Nancy Gathungu says in the report covering the financial year to June 2024.
Income that NSSF generates from a raft of investments such as property is exempted from taxation on condition that any surplus amounts be allocated to the accounts of individual members.
The agency is also required to submit its audited annual report to the KRA within nine months of the end of the accounting period to which the audit report relates.
NSSF is also required to undertake a valuation of its assets every three years as a condition of its exemption from paying income tax.
Before the law was enacted in 2002, NSSF, which was not paying income tax, had no conditions tied to the exemption.
Delays in refunding firms have caused liquidity issues for businesses, prompting the government to propose that the KRA would pay interest on any delayed tax refunds.
Four years ago, the government announced that KRA would pay interest at the rate of two percent on refunds that remained unpaid three months after traders made the applications.
Tax refunds apply when firms pay taxes upfront, which tend to be exceed the actual dues. The refunds also apply when traders absorb VAT on their inputs but do not pass it on to consumers.
Ms Gathungu added that NSSF has not been receiving interest on the unpaid cash, putting the agency to task for not pressing KRA to refund the money.
“The fund has not been getting any returns on the long outstanding tax receivable balance of Sh940,336,114,” Ms Gathungu said.
KRA is also yet to refund NSSF Sh28.4 million that it paid as tax for interest on bank balances and low interest tax of Sh6.49 million, bringing the total due from KRA to Sh940.33 million.
