KRA upbeat as it surpasses December tax targets

The taxman collected Sh166 billion against a target of Sh164 billion.

In Summary

•KRA posted improved revenue performance rate of 101.3 per cent for December 2020.

•Customs and Border Control Department registered the highest ever monthly revenue collection in KRA’s history by collecting Sh60.777 billion.

KRA headquarters.
KRA headquarters.
Image: FILE

Kenya Revenue Authority is confident of closing in on its revenue targets for the financial year ending June 30, after a good performance last month.

The taxman closed the calendar year 2020 on a high after managing to surpass its December collections target, setting the stage for an improved performance this year.  

Notwithstanding the challenging economic environment that persisted to the tail end of the year, KRA posted improved revenue performance rate of 101.3 per cent for December 2020.

Commissioner General Githii Mburu said this was the first positive and above target collection rate since the outbreak of Covid-19 pandemic.

The improved performance is attributed to the economic recovery following the relaxation of the stringent Covid-19 containment measures and enhanced compliance efforts by KRA in the period.

The taxman collected Sh166 billion against a target of Sh164 billion, representing 3.5 per cent growth over the same period last year.

For the month under review, the Customs and Border Control Department registered the highest ever monthly revenue collection in KRA’s history by collecting Sh60.777 billion, reflecting a growth of 40.9 per cent and registering a revenue surplus of Sh12.191 billion.

This resulted in a cumulative surplus for customs revenue of Sh3.788 billion at the end of December 2020 compared to a deficit of Sh8.402 billion as at the end of November 2020.

Average daily revenue progressively increased to Sh1.744 million in December 2020, the highest ever daily average collection for customs revenue.

Exemptions and remissions in customs declined by 39.3 per cent, positively impacting the revenue base by Sh3.344 billion which is consistent with efforts by government to address the growth of remissions and exemptions which have undermined revenue mobilisation over the years.

“The Domestic Taxes Department also registered the highest collection rate of 91.1 per cent since the start of the covid-19 pandemic," Mburu noted.

During the month under review, Pay As You Earn (PAYE) taxes recorded the best performance at 99.8 per cent while Withholding Tax surpassed the target by Sh725 million reflecting positive economic recovery prospects, he said.

Corporation Taxes recorded a performance rate of 93.5 per cent.

The performance was negatively affected by a decline in instalment remittance from banks by 25.3 per cent (from Sh13.140 billion in December 2019 down to Sh 9.810 billion in December 2020). 

Mburu said the Value Added Tax (VAT) domestic remittances declined by 19.9 per cent as purchases accelerated at a faster rate (8.9 per cent growth) than sales (1.4 per cent growth), thereby diminishing the VAT forecast for the month.

This decline is expected to reverse as businesses convert the stock to sales and further from the reversal of the rate to 16 per cent effective January 1, 2021.

Last year, KRA’s performance was affected by decelerated economic growth; compounded by the coronavirus pandemic that affected the economy.

During the pandemic, the government initiated a raft of fiscal measures to cushion individuals and business entities against the effects of the Covid-19 pandemic.

These included reducing VAT rate from 16 per cent to 14 per cent, slashing the PAYE top marginal rate from 30 per cent to 25 per cent, 100 per cent tax relief for persons earning below Sh24,000 per month and lowering the Corporation Tax rate to 25 per cent from 30per cent, among others.

The revision of these tax rates meant a reduction in the revenue that KRA collects. The taxes have however gone back to initial rates, effective January 1.

Due to the containment and mitigation measures put in place to curb the spread of Covid-19, the economy remained depressed leading to a 5.7 per cent contraction in real GDP in the second quarter of 2020 compared to a 4.9 per cent growth in the first quarter of 2020.

In view of the impact of Covid-19, the economy is projected to grow by a paltry 0.6 per cent, in a recent National Treasury projection, which is a downward revision from an initial 2.6 per cent.

In 2019, growth was at 5.4 per cent.

Looking ahead and with the ongoing implementation of the post Covid-19 Economic Recovery Strategy 2020-2022, revenue performance is expected to accelerate within forecast rates.

KRA has also intensified compliance enforcement efforts by driving the implementation of the new tax measures including digital service tax and  minimum alternative tax.

KRA is further intensifying the use of a robust intelligence network to curb tax evasion and the use of technology to support tax collection.

“We are also implementing the web-based anonymous reporting system to enable the public to report tax evasion while remaining anonymous,” added Mburu.

He said the government is also exploring the deployment of the Tax Appeals Tribunal (TAT) on a full-time basis to expedite resolution of tax disputes which are currently holding more than Sh200 billion.   

These measures will support enhanced revenue collection and anchor the much-needed funding by the government.