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Why taxman may miss revenue target

BUSINESS
By Macharia Kamau | Jun 20th 2019 | 2 min read
By Macharia Kamau | June 20th 2019
BUSINESS
Treasury Cabinet Secretary Henry Rotich.

The Government is likely to miss its revenue collection targets in the upcoming financial year as its hands are tied from implementing new tax measures until October 1.

This follows a court ruling last year barring the National Treasury from imposing taxes proposed in the budget until the Finance Bill has been debated in Parliament and passed into law.

Treasury Cabinet Secretary Henry Rotich submitted the Bill in Parliament last Thursday, setting October 1 as the commencement date for most of the taxation measures for funding the country’s ambitious Sh3 billion budget.

And in what could further derail the taxman’s bid to meet revenue collection targets in the upcoming fiscal year that kicks in on July 1, a few other taxation measures proposed in the budget will only take effect on January 1, next year.

These include the Turnover Tax that will be levied on small and medium enterprises after the failure of the presumptive tax, which was proposed in last year’s budget and became effective January this year.

A section setting out modalities of taxing users of the Ajira Digital Programme, who will be exempt from income tax on paying a Sh10,000 registration fee, will also take effect in January.

CS Rotich in his budget speech last week proposed major tax measures that hit the poor the hardest in a bid to grow the tax base.

For instance, beginning October 1, firms that employ security guards, drivers, cleaners and other income earners must remit to the Kenya Revenue Authority (KRA) withholding taxes.

Others drawn into the tax base are promotional sales agents and catering staff offering services outside their eateries. In addition to bringing the low-income earners into the tax net, Rotich also raised excise duty on wines, spirits and cigarette packets by 15 per cent, translating to the addition of between Sh18 and Sh24 per bottle for the taxman.

Traditionally, finance ministers unleashed new taxes on budget day, some of which came into effect at midnight while others were implemented at the beginning of the following financial year, which normally kicks in on July 1.

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