KRA misses revenue target by Sh12 billion

By MORRIS ARON

Plans to fund the biggest budget in the country’s history from tax proceeds have ran into doubt after Kenya Revenue Authority (KRA) fell short of its revenue targets in the just concluded financial year.

KRA registered a Sh12.3 billion revenue shortfall in 2008/09 financial year, according to a performance report released on Monday, a possible indication of the tough times ahead for the taxman.

"We are optimistic that as the economy picks up, we will be able to meet our targets this financial year," said Mr Michael Waweru, KRA commissioner general.

KRA is now betting on a strategy to grow taxpayer numbers and quick economic recovery to collect Sh545 billion, out of the Sh866 billion needed in this year’s budget.

But as inflation persists due to high cost of food, with the cost of electricity and water set to rise, questions abound if such targets will be met.

Though revenue collection increased by 17.7 per cent above the target to Sh493 billion in the fourth quarter 2008/09 compared to a similar period in 2007/08, KRA had missed its third quarter tax collection target by Sh5.1 billion.

Harsh conditions

The latest report indicates that most of the revenue was realised from the domestic tax department at Sh94 billion — largely driven by income tax proceeds and customs department at Sh45 billion — which comprises taxes collected from import-export business.

KRA said harsh economic conditions characterised by high inflation trends, depreciation of the shilling and the bearish stock market slowed economic growth, impacting negatively on revenue collection performance.

According to statistics, economic growth momentum, which started in 2003 with a gross domestic product growth rate of 7.1 per cent in 2007 declined to 1.7 per cent last year.

Inflation peaked in November last year at 29.4 per cent before gradually declining to 17.8 per cent last month. Despite the concerns, KRA, however, remains hopeful on the prospects of a quick economic recovery citing the rising number of businessmen who have applied to import goods as a good indicator.

"The number of people applying to import goods has doubled in the first-half of the year — an indication of good economic prospects," said Mr Waweru. KRA said it had outlined administrative measures to grow the number of people paying tax.

The taxman is also streamlining its operations at the ports of entry where corruption is rampant and also introduced best practises to eliminate its own officers who are corrupt.

"With these measures in place, we do not anticipate that there will be a drop in the level of tax revenues come the end of this financial year," said Waweru.