Kenya Revenue Authority misses Treasury’s revenue target by Sh69 billion

The taxman has missed the revenue target by Sh69 billion in the first nine months to March.

The Kenya Revenue Authority (KRA) said it had collected Sh811billion between July 2015 and March this year, against a target of Sh911billion set by Treasury for the period.

At the same time KRA announced it had started a lifestyle audit of its employee to seal tax leakages.

This amount raised is Sh88 billion more than what it collected in a similar period in 2014/15 but has been running behind new targets set by the Treasury.

The taxman collected Sh753billion in a similar period last year but the expanding budget has seen the Government ask for more from the taxman.

Kenya Revenue Authority Commissioner General John Njiraini (right) with Ag Commissioner, Domestic Taxes Benson Korongo during the press briefing to give updates on revenue collection. The taxman has missed the revenue target by Sh69 billion in the first nine months to March. (PHOTO: DAVID NJAAGA/ STANDARD)

Treasury had set a 20.9 per cent revenue growth target for the taxman. But KRA has only met about half that target after it posted an 11.7 per cent growth, which it sees as strong enough given the tough economic environment that has seen many companies report losses or decline in profitability.

KRA said the collection had been impacted by the delayed enactment of the Excise Act, which it says denied it about Sh6.9billion.

“A continued weak business performance undermined performance of corporation tax. We started receiving these reports in the first quarter from players in the private sector,” KRA Commissioner General John Njiraini said at a briefing yesterday.

A revenue shortfall means the Government has to look for alternative means to get money to pay its bills, which includes borrowing, or find avenues to cut costs.

“Banks are also having problems and some have told us they have had to provide heavily for non-performing loans and this has affected their performance. When businesses fail to pay their loans, that is also another sign that they are struggling and this translates to our revenue performance,” Njiraini added.

The drop in oil prices and tax exemptions on donor-funded projects have also had a bearing on the performance.

KRA says exemptions have cost it Sh6.7billion in loss of revenue in the period and now wants the Government to consider paying taxes on behalf of donors in cases where contracts do not allow the donor agencies to pay taxes.

Freeze on hiring

Njiraini has also blamed the stagnation in the Pay As You Earn (PAYE) for the performance on grounds that most companies are not hiring and those that are in operation are not increasing the pay for workers in line with the set targets.

The new VAT laws saw the taxman deliver a 23.2 per cent growth in domestic VAT collection to Sh112 billion.

This was well ahead of the Sh104 billion target. Domestic excise tax collections were also ahead of target, raising Sh34 billion in the nine months to July.

Others that posted positive growth include the Import duty and Excise tax on imports.

But the Railways Development Levy (RDL) and the Import Declaration Fees (IDF) registered negative growths of 10.4 per cent and 4.3 per cent respectively.

The Road Maintenance Levy Fund on its part emerged the best performer by growth rates, after it posted a 48 per cent jump in revenue to Sh32.4billion.

Njiraini said the organisation is now doing background searches on about 70 top employees in the first phase of the lifestyle audit.

“We are using a risk-based approach where we prioritise the most vulnerable cadres. The background checks for the top team is in progress,” he said. Njiraini said KRA has about 5,000 employees and not all of them will be taken through the vetting exercise, which is being conducted in partnership with the Ethics and Anti Corruption Commission (EACC).

“The next focal groups are being identified and a gradual roll-out to all areas of interest will be done,” Njiraini said. He said these reforms will support other efforts to put in place to boost performance at the agency such as putting it top staff on contracts.

“This is the only public institution where the first top grades are on contracts and we want to increase the number of employees under contract to 300.This way employees are more accountable because they know a time will come when they have a date with destiny,” he added.

The lifestyle audit comes at a time when KRA is investigating a major tax evasion scandal in which its employees colluded with some employees of several commercial banks, among them Equity Bank, to manipulate the Simba system and pass off goods in the system as paid for yet KRA never received the money in its accounts.