CS Rotich banks on new taxes to bridge Sh28b revenue shortfall

A greengrocer at a stall in Nairobi. Among the new raft of taxes is a presumptive tax targeting small traders that kicked in on January 1 this year. [Photo: Standard]

Treasury is banking on new taxes to bridge a deficit of Sh28 billion in revenue collection by the taxman in the first half of the current financial year.

The Kenya Revenue Authority fell short of its target in the first five months of last year after poor performance in excise taxes and import duty, according to National Treasury Cabinet Secretary Henry Rotich in the Draft 2019 Budget Policy Statement (BPS).

He said income tax from corporations also recorded negative growth as at November. 

Last year, the Government introduced a number of taxes, most of which were viewed as punitive, in a bid to finance a Sh2.6 trillion budget for the financial year ending June this year.

“Despite the strong growth, cumulative ordinary revenue still fell short of the November target by Sh27.7 billion,” said Mr Rotich in the document released last week.

Bounce back

He said Treasury would monitor the two tax groups which in the period under review “performed below the cumulative November 2018 targets”.

Rotich said he expected income tax to bounce back to target levels by the third quarter due to the strong performance recorded in the economy in the first half of this financial year.

BPS is supposed to guide the budget-making process by both the national and county governments for the upcoming fiscal year, in this case, 2019/2020.

The taxes Treasury is betting on include the eight per cent value-added tax on petroleum products, mobile money transfer services, airtime and internet data with an excise duty of 15 per cent, up from 10 per cent.

Bank fees such as ATM withdrawals, depositing a banker’s cheque and over-the-counter withdrawals have also been slapped with an increased tax of 20 per cent, up from 10 per cent.