This archive report was first published on 29 September 2019.
Kenya Revenue Authority's (KRA) tax collections from corporate income fell short of the Treasury's target in the year ended June 2019, due to reduced corporate deals.
According to provisional statistics tabled in the National Assembly by the Treasury, tax collections on company earnings grew by a mere 0.71 percent to Sh292.03 billion, underperforming the Treasury's goal of Sh388.94 billion by Sh96.91 billion.
The shortfall in corporate income tax receipts to KRA was higher than the Sh75.07 billion posted in the previous year ended June 2018, when the taxman collected Sh289.96 billion against a target of Sh365.03 billion.
Business leaders have cited reduced flow of credit as a result of the 2016 legal ceilings on interest rates, growing backlogs at Inland Container Depot (ICD) in Nairobi, and delayed payments by state entities as constraining corporate deals.
Early September, KRA disclosed that only 33,426, or 8.3 percent, of the 401,306 firms which registered for corporation tax paid, pointing to high levels of non-compliance. Some 168,428 or 42 percent of the firms filed returns, signaling they were active, but 80.15 percent of these did not pay the taxman a shilling by end of June.
Corporation tax, levied at a standard 30 percent of earnings for firms incorporated in Kenya and 37.5 percent for foreign ones, forms the bulk of revenue the government derives from companies. Stephen Waweru, a senior manager for tax services at consultancy and audit firm KPMG, noted that tax compliance is intrinsically linked to revenue performance, and that the government should consider reducing the corporation tax rate and rely more on indirect taxes to enhance revenue mobilisation.
