This archive report was first published on 11 June 2020.
Published on June 11, 2020, Nairobi — The COVID-19 pandemic has left Kenya's economy reeling, with experts warning that the country's tax collection projections may be overly ambitious.
As Treasury Cabinet Secretary Ukuru Yatani prepares to present the 2020/2021 budget, economists are sounding the alarm about the potential for reduced revenue due to the pandemic's disruption of business and job losses.
According to the Treasury, the country is expected to collect at least Sh1.9 trillion, including Sh1.6 trillion in ordinary revenue, such as tax collections and investment incomes.
However, this figure is a reduction from the initial revenue target of Sh2.1 trillion, and experts believe it may still be too high given the current economic conditions.
"The Treasury has tried to reduce the revenue estimates, but that being the case, that is on the higher side," said Genghis Capital Senior Analyst Churchill Ogutu. "We still don't know the severity of the duration of COVID-19, which has hurt the economy and constrained government revenue streams."
"The Treasury has tried to reduce the revenue estimates, but that being the case, that is on the higher side," said Genghis Capital Senior Analyst Churchill Ogutu. The pandemic has had a significant impact on various tax revenue streams, including excise duty, Value Added Tax, and import duty, as well as corporate income tax and Pay As You Earn. Under the Tax Laws (Amendment) Bill, 2020, the Value Added Tax rate was lowered from 16 to 14 per cent, the Corporation Tax was revised to 25 per cent, and Non-Resident Tax on Dividends was adjusted from 10 to 15 per cent. Experts believe that the government may need to use a supplementary budget to reduce the budget deficit, which is projected to be 7.3 per cent of the country's gross domestic product in the coming financial year.
