This archive report was first published on 11 June 2020.
As the country awaits the 2020/2021 budget reading by Treasury Cabinet Secretary Ukuru Yatani, experts are cautioning that the current tax collection projections are overly optimistic, given the economic challenges posed by the COVID-19 pandemic.
Published on June 11, 2020, the budget is expected to set the tone for the country's economic recovery, but experts warn that the projections may be unrealistic.
The Treasury projects to collect at least Sh1.9 trillion, including Sh1.6 trillion of ordinary revenue, which includes tax collections, investment incomes, and other revenues collected by the Kenya Revenue Authority.
However, the figures projected under the 2020 Budget Policy Statement were adjusted down from an initial revenue target of Sh2.1 trillion, raising concerns that the current projections may be too ambitious.
According to Genghis Capital Senior Analyst Churchill Ogutu, the COVID-19 environment has been characterized by reduced income, disrupted business, and job losses, which are expected to disrupt government revenue streams.
“Treasury has tried to reduce the revenue estimates, but that being the case, that is on the higher side. We still don’t know the severity of the duration of COVID-19, which has hurt the economy and constrained government revenue streams,” Ogutu said during an interview.
The pandemic has had a negative impact on excise duty, Value Added Tax, and import duty revenue streams, while disrupted business environments have impacted corporate income tax, and reduced employment income has sabotaged Pay As You Earn streams.
