Challenges in Vat Remittance in the Kenya Road Construction Industry: A Case Study of Kitui Region

Road transport is the predominant mode of transport and caries about 93 % of all cargo and passenger traffic in the country. Due to this the government allocates a large sum of its budget to road construction activities. Out of this budget 16 % is supposed to revert back to the government in form of VAT but according to the statistics, KRA fails to meet its target by large margins. VAT is an important component of revenue collection and it aids economic development in our country. The objective of this study was to determine the challenges of VAT remittance in the road construction sector. This research was a survey involving road contractors in Kitui, since there is no KRA office in the county possibilities of evading tax are high. The other reason for concentrating in Kitui is due to the vastness of the county, there are several constructions going on. Primary data was collected from 500 contractors for descriptive and quantitative research design. The researcher used random sampling to pick a sample of 120 contractors, the response rate was 86. A correlation analysis was used to analyze data. The study found out that withholding agents were important because they deducted VAT at source, thereby making VAT remittance easier for the road contractors. KRA follow-up procedures were important in that they helped in minimizing cases of evasion of tax therefore enabling VAT remittance. It also found out that the number of construction activities was a challenge in that the fewer the activities the less VAT was remitted. The complexity of tax laws was a challenge since the road contractors could not understand the tax laws and therefore it hindered their VAT remittance. The study concluded that involvement of withholding agents, emphasis on KRA follow up procedures, increase in number of road construction activities and demystifying of tax laws would increase VAT remittance.