KRA blames Treasury's policies for missing target : The Standard

?The taxman has blamed poor revenue collection on tax reliefs the government has given to businesses and employees. In its annual revenue performance report for the year 2018/19, the Kenya Revenue Authority (KRA) said deduction on investment and widening of tax bands negatively impacted collection of income taxes which includes pay-as-you-earn (PAYE) and corporate taxes. Generally subdued growth in the private sector employment saw PAYE grow by 7.9 per cent mainly on account of increased salaries to teachers.   “PAYE growth was driven by the public sector, which registered a cumulative growth of 8.9 per cent driven by upscaling of salaries in the education sector,” said KRA Commissioner General Githii Mburu.

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The decision by suspended National Treasury Cabinet Secretary Henry Rotich to implement a new taxation schedule on incomes, which saw Kenyans, especially the poor, put more money into their pocket, also contributed to the dismal revenue collection efforts. “Tax policy, driven by the impact of the widening of tax bands, reduced the revenue base by Sh6.1 billion cumulatively,” explained Mburu.  Taxes on profits, corporation taxes, grew by 5.5 per cent in what the taxman said was “severely undermined by growth in investment deductions.” The tax agency said it recovered Sh12.6 billion from 210 tax evasion cases won while 222 suspects were prosecuted at the law courts leading to recovery of taxes amounting to Sh12.9 billion. Investment deductions, where investors who incur spend on capital goods such as building and/or machinery used for manufacture are entitled to a hundred per cent tax exemption on their profits, grew by 284 per cent compared to 2017/18. 

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Corporation tax, which underperformed in the first three quarters of the financial year that ended June, picked up in the fourth quarter helped mostly by increased profitability in the banking sector. “The tax head witnessed a turn-around in the 4th quarter, growing at 12 per cent compared to an average 1.8 per cent over the 1st three quarters. This was principally due to the turn-around in the bank’s performance with an overall growth of 29.3 per cent in the 4th quarter compared to a decline of 7.9 per cent in the 1st three quarters.” Total revenue collection during this period, including monies such as agency fees, hit a new high of Sh1.58 trillion compared to Sh1.43 trillion collected in the previous financial year. Revenue collected on behalf of other government agencies mainly at the ports of entry amounted to Sh103 billion. Domestic Taxes Department’s good performance was largely attributed to rental income tax, which grew by 41.7 per cent and domestic value-added tax (VAT), which grew by 12.3 per cent.

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“This is attributed to tax base expansion initiatives that are part of the recently launched KRA 7th Corporate Plan,” says KRA. KRA says income tax, from businesses and employees, underperformed, a situation that saw the taxman miss its revised target by Sh72.6 billion.  

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