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Tax revenue dipped by Sh89b in January

BUSINESS
By Dominic Omondi | February 20th 2021

Times Tower Building in Nairobi which hosts Kenya Revenue Offices (KRA). [Wilberforce Okwiri, Srandard]

Kenya Revenue Authority (KRA) collected Sh89.6 billion less in January compared to the same period in 2020.

According to the latest statement from the National Treasury, the taxman netted Sh784.9 billion in the first seven months of the 2020-21 financial year, which was a 10.2 per cent drop from the Sh874.5 billion collected last year.

Despite acknowledging that the economy will struggle to find its footing in the next financial year starting July, Treasury pushed up its tax collection estimates in its final Budget Policy Statement for 2021 from the draft estimate released earlier.

“Going forward, we expect revenue collection in the FY2021-22 to spring back buoyed by the improving economic environment, tax policy and revenue administration measures that we have put in place,” said National Treasury Cabinet Secretary Ukur Yatani.

Increased economic activities in December last year saw KRA surpass its tax target for the first time during the Covid-19 pandemic, netting more than Sh166 billion.

Nonetheless, Treasury expects tax revenues to recover as economic activities pick after the containment measures against the spread of Covid-19 were relaxed.

Increase in tax collection is one of the conditions that informed the approval by International Monetary Fund of a crucial Sh261 billion credit facility for under a three-year programme.

The programme will also see the country tighten its belt with spending cuts in what is aimed at reducing debt vulnerabilities and safeguarding resources to protect vulnerable groups.

It is also expected to boost Kenya’s ongoing efforts at fighting corruption, strengthen the monetary policy framework and support financial stability.

Treasury has since revised its budget for Financial Year 2021-22 to Sh3.01 trillion.

Draft estimates released last month had put the spending plan for the next year at Sh2.968 trillion, which is Sh48 billion lower than the new figures released last week.

This saw the government increase its tax collection target by Sh11.2 billion, with KRA now expected to mobilise Sh1.775 trillion in taxes in the 12 months to June next year.

This means that the taxman, which received additional grants in the mini-budget released last week, will need to enhance its collection efforts.

Besides out-of-court settlements on disputes with taxpayers, KRA will most likely rely on technological tools such as the Excisable Goods Management System to reduce revenue shortfalls.

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