KRA must collect Sh859 billion in six months to meet revenue target

The tax authority has been grappling with ambitious targets and falling short, even as the Government ramps up expectation to finance the budget each year. PHOTO: STANDARD

The taxman will be under pressure to intensify tax collection after latest data show a balance of Sh859 billion that must be raised in the next six months.

According to the National Treasury financials printed on the Kenya Gazzette last week, so far the Government has received a total of Sh473 billion in total taxes up to November. This is against a target of Sh1.3 trillion set for the Kenya Revenue Authority (KRA) by Treasury Cabinet Secretary Henry Rotich under the current budget.

The tax authority has been grappling with ambitious targets and falling short, even as the Government ramps up expectation to finance the budget each year.

Last year, KRA blamed a slump in tax earnings from Pay as Your Earn (PAYE) for its inability to raise Sh1.2 trillion.

“By the end of December 2015 there was a huge shortfall in ordinary revenue collection made of a Sh26 billion deficit in Pay-As-You-Earn (PAYE) revenue and a Sh15.9 billion shortfall in Value Added Tax (VAT) collection from imports,” KRA said.

With massive job losses this year, a slowdown in PAYE is expected to be a noticeable excuse if the revenue target for the current fiscal year is not realised. Companies have also struggled to make sizable profits with listed firms trading at record low indices that saw the Nairobi bourse issue a profit warning for the first time since it was demutualized and listed.

However, KRA said the implementation of electronic excise duty stamps earlier this year had allowed it to increase collections by up to 40 per cent.

The taxman said the rollout of the Excisable Goods Management System (EGMS), that targets key revenue earners-- tobacco, wines and spirits, has seen reduction in revenue leakages.

In April this year, the taxman sought to hire a consultant to help improve its targets by expanding its tax base.
KRA has also been widening its tax net to bring on board new tax payers, including those who earn rental income with a view of expanding the number of active tax payers from the current 1.6 million to four million by 2017-2018. The authority also rolled out the iTax that allows for convenient electronic filing of returns from the comfort of one’s home or office, avoiding physical paperwork to reach more taxpayers.

Treasury figures also point to a government under more pressure to finance its operations having raised Sh732 billion as of November this year against an expectation of Sh2 trillion by the end of the fiscal year.

The government has borrowed a total of Sh145 billion domestic loans against an annual target of Sh406 billion. Treasury will however need to arrange a commercial loan next year after it only sourced Sh10 billion against a target of Sh153 billion from the international markets.

Loans from foreign governments and international governments stood at Sh11 billion from expectations of Sh50 billion by June 2017. On grants, Kenya international partners have only wired Sh5 billion against a promise to provide Sh16 billion by the end of the fiscal year.

Treasury was however able to recover Sh6 billion from money that was not spent last year to ease its financing pressures.

The financial health of the National Treasury’s balance sheet will be crucial in containing interest rates as such data will inform how the market should price their loans to government.

Currently, Treasury has been able to borrow locally at affordable rates as the government is seen to be at a comfortable position ahead of its targeted borrowing calendar.