COLLECTIONS

KRA surpasses 2020/21 revenue target

This is the first time since financial year 2013/14.

In Summary

•The 2020/2021 revenue target as reflected in the 2021 Budget Policy Statement was Sh1.652 trillion, which KRA surpassed with a surplus of Sh16.81 billion. 

•This represents a performance rate of 101 per cent and revenue growth of 3.9 per cent compared to the previous financial year.

The KRA headquarters at the Times Tower
The KRA headquarters at the Times Tower
Image: FILE

Kenya Revenue Authority (KRA) has beaten its revenue target after an eight year struggle to meet its obligation in supporting the government's annual spendings. 

The taxman has defined challenges brought about by the Covid-19 pandemic to surpass its target, since the financial year 2013/14. 

Revenue collection in the financial year 2020/21, which ended on June 30, reached a new record of Sh1.669 trillion compared to Sh1.607 trillion collected in financial year 2019/20. This is both tax and non-tax revenue. 

The 2020/2021 revenue target as reflected in the 2021 Budget Policy Statement was Sh1.652 trillion, which KRA surpassed with a surplus of Sh16.81 billion. 

This represents a performance rate of 101 per cent and revenue growth of 3.9 per cent compared to the previous financial year.

It is consistent with the prevailing economic indicators, especially the projected GDP growth of 0.6 per cent in 2020, commissioner general Githii Mburu notes.

Revenue collection has more than doubled in the last 10 years from Sh707 billion in 2011/12 , representing a growth of 136 per cent.

In the period under review, the exchequer revenue grew by 2.3 per cent with a collection of Sh 1.544 trillion compared to Sh1.510 trillion collected in financial year 2019/20,  and represents a performance rate of 100.9 per cent against the target of Sh1.530 trillion.

This is before accounting for Sh18.5 billion that the  National Treasury has undertaken to pay on behalf of taxpayers for various reasons including economic hardship during the pandemic. 

The Domestic Taxes Department (DTD) collected Sh1.039 trillion during the financial year translating to a performance rate of 99.8 per cent while Customs and Border Control collected Sh624.77 billion, surpassing its target of Sh606 billion.

Petroleum taxes amounted to Sh226.680 billion posting a growth of 34.5 per cent  and a surplus of Sh12.252 billion.

Non-oil revenue recorded a growth of 16.4 per cent with collections amounting to Sh398.1 billion which was above target by Sh5.9 billion.

Corporation tax recorded a growth of 3.7 per cent in financial year 2020/21 despite a tough business environment, where the tax rate was reduced from 30 per cent to 25 per cent in the first half of the financial year.

"This performance was driven by increased remittance from energy, agriculture and construction sectors with a growth of 222.7 per cent , 33.1 per cent and 31.9 per cent respectively," Githii said in a statement.

Pay As You Earn however declined by 9.3 per cent, pegged on a reduction in the employment rate emanating from measures taken by mainly private firms to reduce operating costs as a result of the Covid-19 pandemic.

According to the taxman, the tax head was also affected by the reduction of the top PAYE rate from 30 per cent  to 25 per cent and a 100 per cent tax relief for persons earning below Sh 24, 000 per month.

Withholding tax recorded a growth of 3.8 per cent which is a drop from an average growth of 18.2 per cent recorded the previous year.

"The performance was negatively impacted by depressed economic growth due to the impact of the Covid-19 pandemic," Githii said.

Domestic excise tax recorded a growth of 12 per cent compared to a decline of 6.4 per cent recorded in the last financial year.

The performance turnaround is attributed to the gradual reopening of the economy and extended operating hours for bars and restaurants.

Domestic VAT however recorded a decline of 7.9 per cent, primarily on effects of Covid-19 which saw business turnovers decline. The decline was also affected by the reduction of the VAT rate from 16 per cent to 14 per cent. 

During the period under review, KRA implemented a number of Revenue Enhancement Initiatives that enabled the Authority to enhance revenue collection.

 This was largely driven by enhanced compliance enforcement efforts and the implementation of new tax measures focused on ensuring that that non-compliant taxpayers pay their tax due.

The good performance is also attributed to Tax Base Expansion (TBE) which was a key deliverable in the authority's 7th Corporate Plan.

Through this initiative, KRA recruited more taxpayers through the newly implemented taxes including Digital Services Tax, Minimum Tax, and Voluntary Tax Disclosure among others. 

Over the 7th Corporate Plan period, active taxpayers increased from 3.94 million to 6.1 million.

The introduction of Alternative Dispute Resolution (ADR) also saw taxpayers come forward to find an amicable solutions in disputes with KRA, Githii notes.

With the main objective being to ensure, faster, objective and efficient resolution of tax disputes, ADR enabled KRA to unlock Sh31.435 billion in taxes out of 552 cases resolved during the FY 2020/2021.

The enhanced recovery of tax arrears saw KRA mobilise Sh93.7 billion in the 2020/2021 compared to Sh84. 7 billion collected in financial year 2019/2020.

National Treasury has set the 2021/22 revenue target at Sh1.78 trillion, hoping the economy will rebound, projected at 6.3 per cent and 6.1 per cent in the medium.

Total revenue including A-I-A and grants is projected at Sh2.1 trillion, equivalent to 17.0 per cent of GDP.

The deficit in the Sh3.6 trillion will be funded through borrowing, both internally and externally, even as Treasury mulls reducing the fiscal deficit.

To meet its target, KRA is expected to collect Sh835 billion as income tax, which accounts for approximately 50 per cent of tax revenue, projected to increase by Sh102 billion.

The Authorities 8th Corporate Plan targets to collect Sh 6.831 trillion by the end of financial year 2023/2024.