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KRA falls short of half-year target as job losses hit taxes

By Otiato Guguyu | February 23rd 2017
A heavy machinery loads one of the fourteen containers loaded with primary schools laptops at the Siginon yard in Miritini soon after they arrived at the port of Mombasa on board a ship, September 23, 2016.

The Kenya Revenue Authority has failed to meet its half-year target by Sh20 billion.

The taxman collected Sh623 billion against a target of Sh643 billion, piling pressure on budget financing.

In total, Government revenues fell short by Sh27 billion, including KRA collections and Appropriations in Aid (A-I-A), which is income from State departments and agencies.

“By the end of December 2016, total cumulative revenues, including Appropriations in Aid collected, amounted to Sh674 billion against a target of Sh701 billion,” a Treasury document submitted to Parliament read. KRA’s collection of Pay As You Earn missed the target by Sh17 billion, with the agency raising Sh144 billion from formal workers. The economy has witnessed a spate of job cuts across the private sector, as well as a freeze in employment in Government.

Unforeseen disruptions caused by labour action, including among medical workers and teaching staff, are expected to also affect KRA’s PAYE collections. Further, new income tax bands took effect in January in an effort to give overburdened taxpayers some relief.

Tax relief

The new bands that will impose a graduated tax rate from 10 per cent for subordinate staff to 30 per cent for entry level staff to highly paid executives will put more money in workers’ pockets, but reduce KRA’s collections.

The revised income tax law also dampens KRA’s hopes of making more money, with a general increase in tax relief from Sh13,944 a year (Sh1,162 per month) to Sh15,360 a year (Sh1,280 per month).

KRA also underperformed in the collection of Value Added Tax (VAT) on imports by Sh10 billion, netting Sh68 billion.

Import duty was also off-target by Sh3 billion, with KRA collecting Sh42 billion in six months.

This is a stark reminder of the dwindling regional trade in East Africa that Kenya has long relied on to prop the local economy against shocks in external markets.

The Kenya National Bureau of Statistics indicated that exports to Uganda, which is the country’s biggest market, dropped by 20 per cent in the first 10 months of 2016 to Sh41.8 billion.

Exports to Rwanda also shrank by 7.5 per cent over the same period, though Tanzania registered a marginal increase of 2.5 per cent.

On the upside for the taxman, investment revenue and tax on consumer goods were impressive, bringing in an additional Sh9 billion and Sh7 billion, respectively.

The Railway Development Levy, set at 1.5 per cent of the value of imported goods, also netted Sh13 billion against a target of Sh9 billion.

Still, with the current collections, KRA will have to dig deep to raise Sh677 billion by the end of the financial year – which is in four months – to hit the Sh1.3 trillion target set by the Treasury.

Further, the taxman has been given a higher target of Sh1.5 trillion in the financial year starting July 1, 2018. KRA’s current pace of collections is, however, better than last year’s by 18 per cent.

Ministries, departments, agencies and State corporations also under-performed, with the Treasury receiving Sh50 billion in A-I-A against a Sh57 billion target.

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