Little-known tax procedural trap killing businesses silently

There is a silent crisis unravelling across Kenya’s business landscape. A slow, grinding pain that starts with a letter unseen, a flag raised quietly, and a personal identification number (PIN) suddenly suspended.

The Kenya Revenue Authority, in its zeal to enforce compliance, has created a mechanism known as the Value-Added Tax (VAT) Special Table, a little-known procedural trap with devastating consequences for businesses, many of which are innocent of wrongdoing.

This mechanism, meant to target tax irregularities, has instead become a sentence served before trial. A quiet death of enterprise and reverse trial in motion. With this, KRA acts as the judge, jury and executioner.

When the KRA places a taxpayer or supplier on this so-called VAT Special Table, the system does not just freeze. It cripples.

Your PIN is suspended without warning, your business activities come to a halt, and your clients who may have genuinely transacted with you are unable to claim input VAT. The digital system rejects your PIN. Clients cannot file VAT returns using your details.

They bear a cost they should not, and you, the seller, begin to bleed customers, reputation, and revenue.

In this Kafkaesque setup, the system presumes guilt without investigation. A trader who has built goodwill, fulfilled orders, issued tax invoices, and remained compliant is instantly labelled a suspect. Yet the crime remains undefined. No audit. No hearing. No warning. Just silence and exclusion.

Consider the dire financial impact. A business records output VAT of Sh130,000 and input VAT of Sh100,000.

Under normal circumstances, it would pay the difference, Sh30,000. But imagine two suppliers who contributed Sh40,000 to that input VAT are placed on the VAT Special Table. Without that Sh40,000 being claimable, the business can only offset Sh60,000, meaning they have to pay Sh70,000 in VAT.

In a world where liquidity means survival, this burden is enough to break even the strongest enterprises.

Businesses are no longer growing organically. They are forced into survival mode, constantly pushing themselves into a pay position, even when their books are clean and their operations are above board.

They are no longer expanding through innovation or customer satisfaction. They are simply paying to stay alive. It is no longer about building value; it is about staying out of the VAT Special Table. If this trend continues, businesses’ only way of surviving will be to turn to barter trade.

Let justice guide our taxation. Let fairness precede enforcement. And let no taxpayer ever be sentenced before trial again.

This is not a hypothetical scenario. This is the reality that many businesses are confronting today. With a circulating list of more than 5,000 companies now on the VAT Special Table, the impact is not isolated. It is systemic.

Businesses are interconnected. The exclusion of one player echoes across entire supply chains. Large tax contributors now find themselves entangled with blacklisted suppliers. And just like that, the web unravels. Sales drop. Clients walk away. Entire business models collapse.

A case example is where KRA’s reason for placing these companies on the special table is early filing, sales without purchases and payment, leaving you wondering how you get punished for following the law, which allows VAT tax returns to be filed between the 1st of the following month and the 20th.

This is a major tax decision that we believe there has to be lied down procedure or even a regulation before it is made by the commissioner, taxpayers also need to be granted right of hearing, as is stipulated under Sec 29 of the Tax Procedures Act 2015, where there is a proper procedure to be followed by the commissioner and the taxpayer before tax decision is made.

All this unfolds in silence, shrouded by fear. Traders are unwilling to raise their voices. They dread triggering comprehensive audits where even the smallest human error could be penalised heavily.

The injustice is staggering. A trader can be made to suffer, to lose clients, lose credit, lose cash flow, and face potential collapse, all before any audit or investigation is conducted. There is no presumption of innocence; to KRA, you are guilty until proven innocent.

No platform to be heard. No room to rectify. It is imprisonment before trial. It is a punishment before due process. It is, in every way, a violation of the rights enshrined in the Constitution and a betrayal of the Tax Procedures Act. KRA’s mandate is to facilitate, then collect. How does a special table aid in the facilitation and collection of taxes? How will we jitegemea if we are punished for filing and paying taxes on time?

This is not merely a tax enforcement issue. It is a national economic risk. Every unjust suspension, every wrongly flagged PIN, adds another grain to the avalanche of business closures.

The KRA must stop. It must audit and give the right of reply before it punishes. It must investigate before it accuses. It must restore trust in the system.

Because what we are witnessing now is not just the erosion of tax compliance. It is the erosion of the very spirit of enterprise in Kenya.