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Taxman likely to miss revenue collection target

NEWS
By Dominic Omondi | July 1st 2018
KRA set to miss revenue collection target (Courtesy)

The taxman is likely to miss its revenue collection target, putting in jeopardy the Government’s spending plan.

Statement of Actual Revenues and Net Exchequer Issues published Friday in the Kenya Gazette by National Treasury shows that the taxman had received Sh1.17 trillion in taxes by end of May. This is Sh240 billion short of Treasury's revised target of Sh1.4 trillion for 2017/18 financial year.

This leaves the taxman with a nearly impossible task of meeting Treasury’s target as it has managed to collect, on average, Sh106.4 billion every month.

Treasury had initially hoped to collect Sh1.5 trillion in taxes before revising downwards to Sh1.4 trillion as businesses grappled with reduced earnings following a crippling drought and a prolonged electioneering left investors in jitters.

This is despite Treasury giving KRA an additional Sh4.3 billion with the latter promising to squeeze from taxpayers an extra Sh74 billion between January and June 2018.

"Mr Speaker, in order to recoup the revenue shortfalls during the first half of the year, we agreed on a number of revenue enhancement initiatives with the Kenya Revenue Authority (KRA) in February 2018," said Cabinet Secretary for National Treasury Henry Rotich in his budget speech on June 14.

Rotich said that by April, KRA had collected Sh33 billion. "And we expect them to deliver the remaining revenue yield by end June 2018," added Rotich.

With the Government's wiggle room for uptake of more debt narrowing, Treasury has been under pressure to finance its budget through revenues. The Government has already promised Treasury that it will, among other measures, considerably reduce its fiscal deficit- the difference between what it spends and what it earns.

The Government has frozen what it describes as "low priority development projects" even as it looks at alternative non-debt financing for most of its projects.

Already, Treasury has introduced new tax measures, including re-introduction of value-added tax (VAT) on petroleum products and scrapping on various tax exemptions as a means to shoring up its coffers.

Starting July 1, the Government will also increase excise taxes on mobile money transactions and kerosene, a proposal most observers have argued will hurt the poor the most.

Rotich has also proposed to increase late payments penalty by 20 per cent and increase interest on unpaid taxes by one per cent to two per cent, in what is a move aimed at increasing tax compliance.

In March, Rotich warned KRA against missing income tax collection targets, noting that Treasury had given the tax authority everything they needed. He promised to personally visit tax collection centres.

"We have given them the mandate to collect revenues and they have to deliver," the CS said at a press briefing, adding that the Government had played its part by adding KRA more personnel and procuring scanners to nab excise duty cheats, along with rollout of Integrated Customs Management System (ICMS) to seal leakages.

Non- tax revenue

"I’ll personally be visiting collection points to ensure whoever is not working to deliver our targets will face the wrath of Treasury," he said.

Non- tax revenue, which includes appropriation-in-aid (A-I-A)- fees and fines paid to different State agencies and grants from various development partners stood at Sh48.7 billion during the period under review, bringing total revenue to Sh1.22 trillion.

 

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