This archive report was first published on 3 August 2019.
On August 3, 2019, the Kenya Revenue Authority (KRA) released its annual revenue performance report for the year 2018/19, citing tax reliefs as a major contributor to its poor revenue collection.
The report stated that deductions on investment and the widening of tax bands negatively impacted the collection of income taxes, including pay-as-you-earn (PAYE) and corporate taxes.
According to the report, PAYE growth was driven by the public sector, which registered a cumulative growth of 8.9 percent, mainly due to increased salaries for teachers.
KRA Commissioner General Githii Mburu attributed the dismal revenue collection efforts to the decision by suspended National Treasury Cabinet Secretary Henry Rotich to implement a new taxation schedule on incomes, which saw Kenyans, especially the poor, put more money into their pocket.
“Tax policy, driven by the impact of the widening of tax bands, reduced the revenue base by Sh6.1 billion cumulatively,” Mburu explained.
Taxes on profits, corporation taxes, grew by 5.5 percent, but were “severely undermined by growth in investment deductions,” the taxman said.
The tax agency recovered Sh12.6 billion from 210 tax evasion cases won and prosecuted 222 suspects, leading to the recovery of taxes amounting to Sh12.9 billion.
Investment deductions grew by 284 percent compared to 2017/18, while corporation tax, which underperformed in the first three quarters, picked up in the fourth quarter, helped by increased profitability in the banking sector.
“The tax head witnessed a turn-around in the 4th quarter, growing at 12 percent compared to an average 1.8 percent over the 1st three quarters. This was principally due to the turn-around in the bank’s performance with an overall growth of 29.3 percent in the 4th quarter compared to a decline of 7.9 percent in the 1st three quarters,” Mburu said.
Total revenue collection during this period, including monies such as agency fees, hit a new high of Sh1.58 trillion compared to Sh1.43 trillion collected in the previous financial year.
