KRA eyes soda, bottled drinks to cool tax thirst

The Kenya Revenue Authority missed its target mark of Sh1.431 trillion by just Sh66 billion in the year 2016/2017, netting Sh1.365 in collections.

The taxman’s latest collection is a 13.8 per cent improvement from the Sh1.21 trillion collected in the 2015/2016 financial year, and is double what was collected in 2011/2012 when the taxman netted Sh707.4 billion. It is represents the highest growth in the last three-year periods 2014/2015, to 2016/2017.

“This performance compares well with prevailing economic indicators including GDP growth of 5.5 per cent and average inflation rate of 8.1 per cent, the latter which mainly affected food items exempt from taxation,” said KRA commissioner general John Njiraini in a statement.

He is now keen on taking his pound of flesh from the multimillion bottled drinks industry in the 2017/2018 financial year following gazettement of fresh regulations to address past industry concerns.

Presently Kenya’s tax-to-GDP ratio stands at 19.3 per cent, the second highest in non-oil economies within Africa, and the highest within the EAC where the average stands at 14.8 per cent, said Njiraini.

He said reduced collections of direct taxes on income was caused by wage and employment freezes in the public sector and lay-offs in key private sectors, including the banking sector as firms opted for technological efficiency.

In the consumption taxes bracket, Njiraini said VAT continued to post strong growth for the fourth year, averaging an annual growth of 21.5 per cent between 2012/2013 financial year to 2016/2017 year.

He said the growth is due to enhanced compliance measure including expansion of withholding VAT framework covering a total 3,231 large taxpayers. Key sectors including construction and telecommunications also posted continued growth in VAT performance.

In the report, domestic excise tax slowed one per cent in the last year compared to annual average growth of 14.0 per cent over the last four years. Beer and tobacco, the main excise contributors, grew at 13.29 per cent.

“The major contribution to excise growth was enhanced compliance brought about by improved enforcement through the Excisable Goods Management System especially for the spirits sector where annual growth reached 22.7 per cent in the 2016/2017 financial year.”