The Kenya Private Sector Alliance (KEPSA) and the Kenya Revenue Authority (KRA) have agreed to strengthen collaboration aimed at improving tax administration, enhancing business competitiveness and creating a more predictable tax regime that supports economic growth while safeguarding government revenue.
The commitment was made during a high-level roundtable held at the KRA Headquarters in Nairobi under the theme “Towards a Competitive, Compliant and Predictable Tax Regime”.
The forum brought together senior government officials and private sector leaders to discuss practical reforms that would improve tax compliance, streamline administration and reduce the cost of doing business.
The meeting was co-chaired by KRA Commissioner General, Adan Mohamed, and KEPSA Chief Executive Officer, Carole Kariuki.
It was attended by the KEPSA Chairperson, Dr. Jas Bedi, Vice Chairperson Brenda Mbathi; representatives from the manufacturing, trade, services and MSME sectors; and the InvestKenya Chief Executive Officer, John Mwenda.
During the discussions, KEPSA presented its Private Sector Tax Priority Matrix, highlighting key challenges affecting businesses, including system outages, delayed tax refunds, customs inefficiencies and policy uncertainty.
Kariuki said businesses continue to experience disruptions arising from intermittent outages of the iTax and Electronic Tax Invoice Management System (eTIMS), as well as limited integration between domestic tax systems and customs platforms.
She noted that the gaps have resulted in ledger mismatches, delayed tax offsets, increased compliance costs and operational inefficiencies for businesses.
Responding to the concerns, Mohamed acknowledged the challenges and said KRA has made significant progress in integrating eTIMS, iTax and the Integrated Customs Management System (iCMS).
He said the integration is intended to facilitate real-time validation of tax information, reduce manual interventions and improve processing efficiency.
The Commissioner General further revealed that KRA has redesigned the architecture of iCMS, iSCAN and the Regional Electronic Cargo Tracking System (RECTS) to ensure that technical failures in one module do not disrupt operations across the entire customs clearance system.
He said the Authority would continue investing in modern digital infrastructure, stronger application programming interfaces (APIs) and offline capabilities to guarantee uninterrupted service delivery.
Mohamed outlined KRA’s reform agenda, saying it is anchored on technology, automation, tax base expansion and stronger collaboration with the private sector.
“Our approach is guided by three priorities. First, technology and automation must resolve system instability and improve service delivery. Second, expanding the tax base is more sustainable than increasing pressure on compliant taxpayers. Third, continuous engagement with KEPSA through structured technical working groups will help deliver practical solutions,” he said.
Cash flow constraints arising from delayed Value Added Tax (VAT) refunds featured prominently during the discussions.
KEPSA argued that prolonged refund processing periods and the existing monthly payment cap of Sh40 million continue to strain the working capital of exporters and manufacturers, reducing Kenya’s competitiveness in international markets.
Mohamed acknowledged the concern, noting that KRA paid approximately Sh5 billion in tax refunds every month during the 2025/2026 financial year.
He said Green Channel claims are currently processed within an average of 49 days, while standard claims take about 60 days under the First-In, First-Out (FIFO) model.
The Commissioner General clarified that the Sh40 million refund cap is determined by National Treasury funding allocations rather than KRA policy, adding that the Authority would continue engaging the Treasury to secure increased allocations.
He also said automation through integration of eTIMS and iCMS would significantly reduce verification timelines and accelerate refund processing.
The meeting also addressed unresolved legacy Section 42 tax credits dating back to the 2013-2018 period, which KEPSA said continue to affect many taxpayers because of data migration challenges during the transition from manual systems to iTax.
Mohamed committed KRA to engaging affected taxpayers directly, conducting technical reconciliations and resolving eligible cases under the ongoing tax amnesty programme.
The participants welcomed KRA’s assurance that future tax laws would be implemented prospectively rather than retrospectively, saying policy predictability is essential for investment planning and business confidence.
InvestKenya CEO, John Mwenda, observed that investors closely monitor policy consistency, efficient tax administration and ease of doing business before making investment decisions.
He said stronger collaboration between KRA and the private sector would improve Kenya’s competitiveness as an investment destination.
On Alternative Dispute Resolution (ADR), KEPSA raised concerns over delays arising from capacity limitations and documentation requirements.
Mohamed supported proposals for risk-based categorisation of tax disputes to facilitate quicker resolution of less complex cases and directed KRA commissioners to work with KEPSA on a revised ADR framework with clear timelines.
Regarding transfer pricing, he acknowledged that most disputes stem from interpretation of regulations and documentation gaps and pledged that KRA would issue additional practice notes to clarify areas of ambiguity.
He also assured stakeholders that new administrative positions would not be applied retrospectively.
A major area of consensus was the need to broaden Kenya’s tax base rather than increase taxes on already compliant businesses.
Mohamed observed that widespread informal trade, under-declaration of income, valuation fraud and weak VAT compliance continue to narrow the country’s tax base.
He said KRA would strengthen enforcement through data analytics while partnering with KEPSA to promote taxpayer education, voluntary compliance and gradual formalisation of MSMEs.
KEPSA also called for the gazettement of outstanding international tax regulations, including Mutual Tax Treaty Relief (MTTR) and Advance Pricing Agreement (APA) regulations, to provide greater certainty for investors.
Mohamed committed to fast-tracking their publication while continuing negotiations on Double Taxation Agreements (DTAs) in collaboration with the National Treasury, the Ministry of Foreign and Diaspora Affairs, the Office of the Attorney General and Parliament.
Participants also discussed customs valuation, scanner downtime, RECTS reliability, withholding VAT, excise duty administration, Digital Services Tax and implementation of the ongoing tax amnesty programme.
The Commissioner General promised continued engagement through sector-specific technical discussions to address operational concerns and improve service delivery.
The roundtable further explored East African Community trade competitiveness, with participants agreeing that KEPSA would submit evidence-based proposals on Common External Tariff (CET) distortions and Stay of Application measures for joint engagement at the regional level.
At the close of the meeting, KEPSA requested KRA to engage the National Treasury on increasing VAT refund allocations, fast-track publication of pending regulations, establish a dedicated task force to resolve outstanding Section 42 tax credits within 90 days and convene technical working groups within 30 days.
Kariuki commended KRA for its openness to dialogue and reaffirmed KEPSA’s commitment to working closely with the Authority to strengthen compliance, expand the tax base and improve Kenya’s investment and business environment.
By Joseph Ng’ang’a
