Corporate tax earnings for the six months to December 2021 grew by Sh30.04 billion, marking the fastest growth pace in over six years.
This is as firms recovered from coronavirus disruptions.
The latest quarterly data by National Treasury shows that the Kenya Revenue Authority (KRA) received Sh186.67 billion as quarterly corporate tax instalments.
The receipts, which relate to collections between July and December last year, was growth from Sh156.62 billion that KRA received in the preceding similar period at the height of Covid-19 disruptions.
The Sh30.04 billion growth translates to a 19.2 per cent growth in collections — being one of the fastest growths in six months in over six years.
Payroll taxes, collected as pay as you earn (PAYE) also recovered, growing by 43.9 per cent or Sh67.03 billion to hit Sh219.65 billion.
The latest PAYE collections surpassed the KRA target by Sh9.89 billion pulling the revenues from the job cuts and layoffs that have caused a 25.65 per cent drop, in the first contraction in more than a decade.
Recovering corporate tax and PAYE signal improving economic conditions as firms reinstate full salaries and rehire workers as revenues recover.
While PAYE surpassed KRA targets, the increased corporate collections were Sh10.92 billion lower than the Sh197.59 billion that the taxman had targeted to receive in the review period.
Taxes on corporate earnings had grown by Sh17 billion to hit Sh162.16 billion in half-year ended December 2019 before Covid-19 disruptions set in from March 2020, knocking down collections by Sh5.54 billion.
Businesses were reeling from reduced revenue in an environment of lockdowns and curfews leading to lower tax remittances.
The State’s move to cut corporate taxes from 30 per cent to 25 per cent for resident companies between May and December 2020 also contributed to dip in collections by KRA in 2020.
Treasury also cushioned workers earning a monthly pay of up to Sh24,000 from taxation, reducing KRA collections during that period.
The recovery in PAYE helped KRA surpass its revenue collection target by Sh42.47 billion.
The taxman collected Sh1.032 trillion against the Sh989.7 billion that had been targeted in the half-year ended December, sending the collections above the Sh810.55 billion collected in a similar period in 2020.
Excise duty collections surpassed the target by Sh8.98 billion while value-added tax (VAT) on imports exceeded the target by Sh21.55 billion.
KRA targets to collect Sh6.8 trillion over the period 2021-22 to 2023-24 financial years, being an average of Sh2.266 trillion every year.
The taxman last year rolled out its eighth strategic plan which is focused on increased revenue mobilisation through tax simplification, technology-driven compliance and tax base expansion.
KRA defied the layoffs, salary cuts and business closures in the Covid-19 environment to net Sh1.669 trillion collections in the financial year ended June 2021 from Sh1.607 trillion collected in the previous period.
The latest collection means that annual revenue collection has more than doubled within a decade given the Sh707 billion that was collected in the financial year 2011-12.
Kenya is keen on collecting more taxes to cut the gaping budget shortfall that has seen total borrowings hit Sh8.2 trillion at the end of December last year, being 86 per cent rise from Sh4.406 trillion five years ago.