Debts and salaries gobble up tax revenue as counties starve

Taxpayers file returns at a KRA support centre. Almost all July taxes went to debt repayment and wages. (Kibata Kihu, Standard)
Salaries and repayment of debt gobbled up almost all tax revenue the Government collected in July.

National Treasury’s Statement for Revenue and Exchequer Issues shows that the country spent Sh55.4 billion on salaries, with Sh33.7 billion going to creditors.

Kenya Revenue Authority collected Sh107 billion in taxes, adding to an opening balance of Sh98.8 billion and non-tax income of Sh308.6 million.

Only one state agency, State Department for Energy, received development cash in the first month of the 2019/20 financial year - while all the 47 counties went without a dime from the Exchequer.

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The Government continued with its austerity measures that it started in the previous financial year, freezing all new development spending and capping recurrent expenditure.

All State corporations and agencies will only be able to spend Sh286 billion by end of September after the Cabinet directed them to spend an equivalent of one quarter of last year’s approved recurrent spending for the three months.

The approved recurrent spending for FY2018/19 was Sh1.14 trillion.

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“This amount should support all priority expenses over the first quarter ending September 30, 2019. Further, a moratorium is hereby issued placing in abeyance all capital expenditures until otherwise directed,” said Head of Public Service Joseph Kinyua.

“During the moratorium period, no capital expenditure is to be undertaken unless the particular expenditure item is an ongoing project and is specifically approved in writing by the National Treasury.”

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The July spending by Treasury came as the standoff between the Senate and the National Assembly over the amount of money the devolved units are supposed to receive from collected taxes threatens to cripple counties.

Treasury’s efforts to collect cash held by various State agencies seems to have yielded only Sh300 million.

KRA’s performance in July was an improvement compared to the same period last year when the taxman collected Sh98.9 billion.

The authority has been given a target of Sh1.8 trillion for the current financial year.

Total revenue collection in FY2018/19, including monies such as agency fees, hit a new high of Sh1.58 trillion compared to Sh1.43 trillion collected in the previous financial year.

However, the taxes mobilised during this period were not enough to fund an expanded budget, forcing Treasury to borrow Sh770 billion during this period against an initial target of Sh635.5 billion, or 6.3 per cent of the GDP.

Increased wages and interest on loans played a large part in forcing the country back into the debt market.

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SalariesNational TreasuryKenya Revenue AuthorityTaxes