This archive report was first published on 6 August 2019.
Kenya Revenue Authority Falls Short of Ksh.1.77 Trillion Target ¶
Published on August 6, 2019, the Kenya Revenue Authority (KRA) has announced a new Ksh.1.58 trillion tax collection record for the period closing June 30, 2019, marking a year-on-year growth in tax collection.
Despite the notable gain in revenue yields for the year, the improved collection from Ksh.1.44 trillion in the preceding period sits 11 percent off the budgeted Ksh.1.77 trillion registered in the 2019 budget policy statement fiscal framework.
The KRA's annual revenue performance report for the 2018/19 fiscal year attributed the shortfall to the outright face-off between the taxman and betting firms over the adoption and implementation of withholding tax on customer winnings, which contributed to the largest share of shortcomings to the presented tax policies in the financial year.
According to the report, tax policies raised Ksh.48.2 billion compared to a forecast of 62.9 billion, resulting in a revenue shortfall of Ksh.14.7 billion or 23 percent of the overall revenue shortfall.
Additionally, a significant reduction in company investments, which soared by nearly three-fold in the negative, undermined the growth for the lump-some tax head as hiccups in the recovery of corporations from the tapered growth of 2017 remained evident.
However, the tax witnessed a late turnaround as the performance of commercial banks was reinvigorated in the fourth quarter of the 2018/19 financial year, jumping by nearly 30 percent in comparison to a 7.9 percent slide in the preceding three quarters.
The KRA reaped big gains from the enactment of the controversial value-added tax (VAT) on petroleum products, with oil-linked revenues surging by 16.3 percent as the new tax propped up the charge by Ksh.17.2 billion.
Despite the gains, the figure lay beneath the targeted Ksh.35 billion levy for petroleum as the additional VAT taxes effectively led to a dip in the use of the commodity by consumers.
The up-scaling of salaries in the public sector saw the pay-as-you-earn (PAYE) income tax priced segment strengthen by 4.5 percent during the year, countering drawback effects from the widening of employee tax bands which saw the revenue base shrink by Ksh.6.1 billion.
Domestic excise taxes surged by 12.3 percent even in the face of a slowdown in both the output of beer and cigarettes, items which contribute largely to the local excise charge.
Domestic VAT on the other hand mirrored the expansion in economic output as withholding taxes notably in the public sector grew by a 12.3 percent margin.
The notable performance in revenues, however, does little to offset ordinary revenue as a share of Gross Domestic Product (GDP), as the tax share in comparison to GDP slides to a flat 18 percent from 18.5 percent as per provisional output data from the Kenya National Bureau of Statistics (KNBS).
The taxman has, however, tipped data-driven revenue mobilization changes to scale up the revenue basket to a GDP share of 19.2 percent by the close of the 2020/2021 financial year.
The KRA's seventh corporate manifesto entails the interlocking of the Integrated Financial Management Information System (IFMIS) and iTax with a view to weed out tax non-compliance.
Further remedies cover the fast-tracking of tax dispute resolution and enhanced scanning to detect concealment of taxable goods.
In the year, the taxman recovered a total of Ksh.25.7 billion from a combination of tax evasion cases won and from the prosecution of suspects.
The taxman hopes to scale up his efficiency in closing in on Treasury targets as years of missed revenue ambition continue to haunt the revenue authority.
“With enhanced operational efficiency as embedded in the ongoing KRA transformation, we are optimistic that the landscape of revenue mobilization and collection in this country will be completely changed,” said KRA Commissioner General Githii Mburu.
