The taxman defied the Covid-19 pandemic to grow revenue collection in the 2019/20 financial year, but still missed the initial target by Sh275 billion.
Kenya Revenue Authority (KRA) said on Thursday that in spite of the difficult operating economic environment brought about by health crisis, the revenue collection for the year July 2019 to June 2020 reached a new record with Sh1.607 trillion collected, compared to Sh1.580 trillion collected in the previous financial year.
The KRA commissioner general, Githii Mburu, who has put up an aggressive tax collection strategy since he assumed office last year, said this represents a performance rate of 97.9 percent and revenue growth of 1.7 percent compared to last financial year.
Mr Mburu said the performance is favourable and matches the prevailing economic indicators, especially the projected GDP growth of between 1.5 percent and 2.3 percent in 2020.
But compared to the initial tax projections as unveiled in the budget, the taxman has fallen short by about Sh275 billion, and this explains why the government has not slowed down on its borrowing spree.
During the reading of the 2019/20 budget, the National Treasury gave KRA a Sh1.88 trillion tax revenue target. Including Appropriations in Aid, the government was targeting to net Sh2.1 trillion in local revenues to help fund part of the Sh2.8 trillion budget. But revenue projections have been a moving target after the government revised the national budget three times in the financial year that ended in June, as it became clearer that it was too ambitious.
In addition, KRA says it also collected other monies including Agency Fees amounting to Sh97.1 billion.
“This is revenue collected on behalf of other government agencies mainly at the ports of entry. They include Road Maintenance Levy, Airport Revenue, Aviation Revenue, and Petroleum Development Fund amongst other levies,” Mr Mburu said.
The exchequer revenue grew by 2.2 percent with a collection of Sh1.510 trillion compared to Sh1.477 trillion collected in 2018/19 financial year.
Mr Mburu said this translates to a performance rate of 98.6 percent against target.
The revenue collection by Domestic Taxes Department (DTD) experienced a growth of four percent, down from an average growth of 13.9 percent recorded in the period July 2019 to February 2020.
DTD collected Sh1.092 trillion, translating to a performance rate of 97.8 percent against target.
Customs and Border Control (C&BC) revenue collection amounted to Sh510.63 billion translating to a performance rate of 98.4 percent. The revenue collection registered a reduction of 2.8 percent compared to the previous financial year.
The corporation tax head grew by 4.8 percent, which is a drop from an average growth of 8.2 percent recorded between July 2019 and February 2020.
Mr Mburu said this performance was driven by increased remittance from finance and insurance and manufacturing sectors, which account for about half of total corporation tax collections.
In particular, installment remittance by firms within the finance and insurance sector grew by 7.6 percent in, mainly due to growth of 6.4 percent in remittances by banks.
Further, Corporation Tax remittance by firms within the manufacturing sector also grew by 12.5 percent in the year.
On its part, Pay as You Earn (PAYE) grew marginally by two percent, a drop from an average growth of 11 percent recorded between July 2019 and February 2020.
The slow growth was driven by decline in employment rate in the fourth quarter emanating from measures taken by mainly private firms to reduce operating costs.
Mr Mburu said the tax head was also majorly affected by the reduction of the top PAYE rate from 30 percent to 25 percent and a 100 percent tax relief for persons earning below Sh24,000 per month.
Withholding taxes recorded an 18.2 percent growth, which is a drop from an average growth of 29.1 percent recorded between July 2019 and February 2020.
KRA said this performance was boosted by increased withholding tax remittance from interest component which grew by 4.7 percent; remittance from dividends component grew by 13.6 percent; management, professional, training tees components recorded growth in remittance of 6.8 percent; while remittance from contractual fees grew by 15.9 percent.
Domestic excise declined by 6.4 percent from an average growth of 4.3 percent recorded between July 2019 and February 2020.
“This performance is mainly attributed to the effects of the Covid-19 pandemic, which contributed to the decline of production of excisable products like cigarettes, spirits, keg beer and non-keg beer,” Mr Mburu said.
On its part, domestic VAT shrunk by seven percent in from an average growth of 2.8 percent recorded between July 2019 and February 2020.
The performance of the tax head was majorly impacted by the Covid-19 pandemic, which saw business turnovers decline. In addition, reduction of VAT rate from 16 percent to 14 percent also had an adverse effect on the tax head’s performance.
Other taxes that declined include trade taxes and petroleum taxes which were hit by the Covid-19 pandemic.