STRATEGY

KRA sealing tax gaps in push to hit Sh1.8 trillion target

It collected Sh631.1 billion for the period July-October 2021.

In Summary

•KRA is going after businesses whose profitability model is based on tax evasion, which are investigated and taxes recovered.

•It is also keen on tax base expansion which focuses on bringing citizens and business previously not paying taxes into the tax net.

Kenya Revenue Authority Commissioner General Githii Mburu.
Kenya Revenue Authority Commissioner General Githii Mburu.
Image: EZEKIEL AMING'A

Tackling tax evasion and illicit trade currently top Kenya Revenue Authority's priorities, commissioner general Githii Mburu now says, as the taxman focusses  on hitting the Sh1.78 trillion target.

This is ordinary revenue for the current financial year ending June 30, 2022.

KRA is also going after businesses whose profitability model is based on tax evasion.

It is also keen on tax base expansion which focuses on bringing on board citizens and business previously not paying taxes into the tax net.

There is also an enhanced compliance efforts focussing on ensuring taxpayers file returns and pay correct taxes, and an extensive use of data and intelligence to unearth unpaid taxes.

Currently, there are over 570 tax disputes tied up in courts with tax assessments of Sh150 billion.

According to IMF, Kenya’s tax gap remains high at 45 per cent for VAT, indicating the need to sustain tax base expansion efforts and upscaling of the fight against tax evasion and illicit trade, Mburu said in a statement.

The authority is optimistic that sustained compliance efforts will continue to yield positive outcomes for the country,” he said.

The authority remains keen on hitting its current annual financial year targets for the second time, after surpassing the Sh1.652 trillion target for 2020/2021 with a surplus of Sh16.81 billion.

On Friday, in announced it had collected Sh154.4 billion in the month of October against a target of Sh142.2 billion.

The reopening of the economy comes as a boost for the taxman who remains optimistic of a better performance in the second quarter of the current financial year.

KRA commenced the new financial year on an upward trajectory after surpassing its July-September target of Sh461.7 billion by Sh15.1 billion, a 30 growth.

 This implies that cumulatively, KRA realised collections of Sh631.1billion for the period July-October against a target of Sh603.9 billion, translating to a performance rate of 104.5 per cent, a growth of 28.3 per cent and a surplus of Sh27 billion.

Major collection came from domestic taxes where KRA netted Sh96.6 billion against a target of Sh90.700 billion, customs duty Sh57.374 billion against a target of Sh51.200 billion and PAYE collections of Sh37 billion against a target of Sh36.462 billion.

Total revenue including Appropriations-in-Aid and grants for the 2021/22 budget is projected at Sh 2.1 trillion, equivalent to 5017.0 per cent of GDP.

Of this, total revenue is projected at Sh2.04 trillion, equivalent to 16.4 per cent of GDP, an increase in nominal terms from Sh1.84 trillion in the financial year 2020/21.

KRA is expected to collect Sh1.78 trillion, a target likely to be hit as the economy reopens.

The sustained strong performance is a reflection of the improving global economic environment as well as the implementation of revenue enhancement initiatives by the authority,” Mburu said.

The African Development Bank projects that the East African Economy will grow by 4.1 per cent in 2021 from 0.4 per cent in 2020.

The Gross Domestic Product is expected to grow by 5.3 per cent in financial year 2021/22 as per 2021 Budget Policy Statement by the National Treasury.

Kenya’s tax to GDP ratio currently stands at 13.8 per cent, indicating the need to continue enhancing tax collection and reducing tax expenditure in the form of exemptions and incentives to achieve the desired rate of over 20 per cent.