Why KRA may miss revenue targets

Commissioner General KRA John Njiraini at a past event. [Photo: Fidelis Kabunyi, Standard]

The Government may miss its revenue collection targets with Treasury revealing that it was short by Sh205 billion as at May this year.

Treasury says in its latest data that by May, the Government had raised Sh1.25 trillion, including revenues from the taxman and ministries, agencies and departments known as Appropriation-in-Aid (AiA).

“Revenues have lagged behind target since the beginning of the 2016/17 financial year,” Treasury said in a Pre-Election report. “Cumulative revenue collection, including AiA for the period July 2016 to May 2017, amounted to Sh1.25 trillion against a target of Sh1.33 trillion representing a 93.5 per cent of targeted revenue,” the report noted.

The Government had projected to raise Sh1.45 trillion (20.1 per cent of GDP) in 2016/17. The Kenya Revenue Authority collected Sh623 billion against a target of Sh643 billion, falling short by Sh20 billion as of December last year.

Treasury, however, points out that the collection is an improvement from last year since revenue netted as at May 2017 was actually 14.5 per cent higher than the 2015/16 fiscal year.

In 2015/16, cumulative revenue collection, including A-i-A, was Sh1.23 trillion which was Sh62 billion below the revised target of Sh1.29 trillion due to shortfall in all tax revenue categories except excise duty.

The Government has even set itself more ambitious targets next year where it expects to collect Sh1.64 trillion, including AiA.

Ordinary revenue is projected at Sh1.49 trillion in 2017/18, up from Sh1.318 trillion in 2016/17.

The taxman is, however, battling shrinking returns from Pay-as-You-Earn with increased layoffs.

But the Kenya National Bureau of Statistics data shows a rise in the number of jobs created from 12.1 million in 2011 to 15.8 million in 2016.

Ballooning wage bill

KRA officials, however, maintain that most of the jobs are menial and in the informal sector which are hard to collect and attract the lowest rate among the tax bands.

Premium employers like banks are actually retrenching.

They also point out that the continued outsourcing of non-core businesses to third party consultancies also attract employees at minimum wages.

The Government has frozen employment in the public sector to manage the ballooning wage bill.