KRA collections up 16pc as Sh303b netted in six months

By Macharia Kamau

Kenya Revenue Authority grew revenue collection by 16.2 per cent in the six months to December, but missed its tax collection target by 1.62 per cent.

The Authority collected Sh303.1 billion during the first half of 2010/11 financial year, a Sh42.3 billion increase over Sh260.8 billion collected in the first half of 2009/10.

KRA, however, missed the target for half year set at Sh308 billion by Sh5 billion.

Among the factors contributing to KRA collecting lower than targeted included a drop in petroleum taxes, which dropped 4.9 per cent.

This was attributed to a row between oil marketers and Energy Ministry and constraints on the fuel storage and distribution system.

"We are slightly behind the targets but expect to bridge the gap by end of the year," said Michael Waweru Commissioner General KRA when he released the half-year performance.

Kenya Revenue Authority Commissioner-General Michael Waweru. He explained that taxes from petroleum products dropped by 4.9 per cent. [PHOTO: FILE]

The country is looking at a prolonged dry period that might affect the economy negatively and in turn impact negatively on tax collection.

Significant drop in mobile telephony calling rates is also likely to affect revenue collection by KRA.

The Authority is, however, optimistic that a continued good performance by the economy would cancel out any challenges that the country is facing.

Growth momentum

Kenyan economy grew 6.1 per cent in the quarter to December and is expected to maintain the momentum throughout this year.

"With drought, inflation is likely to go up, something that would see people spend more on food and shy away from spending on products that are subject to VAT," said Waweru.

"The effect of the growth in the economy will outweigh the negative factors that are at play. Taxation from petroleum was the under achiever, going down 4.9 per cent, he said.

According to details released yesterday, excise duty on oil, which accounts fro 53 per cent on petroleum products declined 3.8 per cent. Revenue from Road Maintenance Levy Fund also dropped 6.3 per cent.

"Several factors contributed to the weak performance in petroleum taxes. First was a stand-off between the Ministry of Energy and key marketers in the first quarter."

"Performance in the sector is also being affected by storage capacity constraints as well as continued rise in world oil prices which has led to reduced demand."

During the period, indirect domestic taxes grew 17 per cent while domestic VAT went up 16.5 per cent.

"VAT could have performed better were it not for the new policy introduced in this year’s budget that require ministries of public works and roads to withhold only 50 per cent of VAT for construction companies and the other 50 per cent is declared by the companies to the Authority," said Waweru.