OPTIMISM

KRA upbeat on Sh1.6 trillion target despite Covid-19

July and August were however slow

In Summary

•KRA collected Sh115.8 billion last month (July) and in August, so far, it has netted Sh85 billion.

•It is counting on re-opening of the economy, resumption of international flights and the return on trade volumes, to increase revenue collection.

The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

Kenya Revenue Authority (KRA) is optimistic of hitting its revenue targets despite a slow start in the first two months of the current financial year, which have been marked with drops.

National Treasury has projected Sh1.63 trillion as ordinary revenues for the financial year 2020/21, to help support government spending in the Sh2.79 trillion planned budget for the year ending June 30, 2021.

In the wake of Covid-19 disruption on the economy, the taxman has so far recorded low revenues in the months of July and August, which have declined by 16.4 per cent and 13.4 per cent respectively, compared to same period last year.

KRA collected Sh115.8 billion last month (July) and in August, so far, it has netted Sh85 billion.

The taxman is however confidence with the economy slowly re-opening, its basket is going to fill up as the financial year unfolds.

“The worse is behind us,” commissioner in-charge of research Alex Mwangi said yesterday, noting the worse months for the authority were April, May and June, when the impact of Covid-19 was greatly felt in the economy.

This included job losses which affected growth on Pay As You Earn (PAYE) taxes that registered a paltry two per cent increase, compared to 11 per cent recorded between July 2019 and February 2020.

The closure of bars and restaurants as a measure to control the spread of Coronavirus also denied KRA a sizable amount of excise duty, mainly from alcoholic drinks and cigarettes.

In the last quarter of the 2019/20 financial year, KRA collected Sh352 billion, a decline of 20.9 per cent on revenues.

It however recorded a 1.7 per cent jump in total revenue collection for the financial year ended June 30, despite a struggling economy ravaged by the Covid-19 pandemic.

Revenue collected between July 2019 and June 2020 reached a new high of Sh1.607 trillion, compared to Sh1.580 trillion collected in the same period in 2018/19.

This represents a performance rate of 97.9 per cent compared to the last financial year.

With the resumption of international flights, a recovery in imports, and re-opening of the local economy, KRA is confident it shall recover in the remaining three quarters of the financial year, with domestic revenues and customs duty expected to pick up in the coming months.

“The outlook is good. The targets are achievable,” commissioner Mwangi said during a virtual media briefing.

KRA is counting on data-driven compliance, resolution of tax disputes, Integrated Customs Management System (iCMS) for cargo clearance, Regional Electronic Cargo Tracking System, and the Digital Service Tax (DST) payable at a rate of 1.5 per cent of the gross transaction value, to drive revenues.

“We have integrated our ICMS with other state agencies which has improved compliance and helped curb issues such as mis-declaration. Improved efficiency means more revenues,” acting Commissioner for Customs and Border Control Pamela Ahago said.

The taxman’s confidence comes even as tax measures to cushion households and corporates from the effects of Covid-19 remain in place.

In April, President Uhuru Kenyatta signed into law the Tax Laws (Amendment) Bill, 2020, putting in place a raft of measures, which included lowering of Value Added Tax rate from 16 to 14 per cent.

The top PAYE rate was also from 30 per cent to 25 per cent and a 100 per cent tax relief for persons earning below Sh24, 000 per month.