• Domestic taxes performance against target for June 2021 stood at 101.9%.
• While Corporation tax and domestic VAT recorded above target performance in the month
When President Kenyatta formed the Multi-Agency Team (MAT), one of its primary responsibilities was to help the Kenya Revenue Authority seal revenue loopholes and enhance revenue collection for development. Over the years, KRA has been one of the biggest beneficiaries of this cooperation between agencies in MAT. We have since seen a lot of improvement with intelligence increasingly being used to get to a lot of tax frauds with several billions recovered in the process. This cooperation and effective strategy implementation helped KRA in one of the most difficult revenue collection periods in our history.
The 2019/2020 and 2020/2021 Financial Years were a mixed of bag for the KRA and the nation at large. Whereas the economy had shown significant signs of recovery, the late shock of the coronavirus pandemic at the end of the third quarter brought with it unexpected downturn in economic activities. In fact, economic activities almost ground to a complete stop for the remainder of 2020 largely because of measures put in place to stop the spread of the deadly virus across all sectors of the economy. Even as we partially lifted some of the containment measures towards the end of 2020, a lot of economic activities were still depressed owing to many people having lost jobs and several businesses closed.
COVID-19 is not only a global pandemic and public health crisis; it has also severely affected the global economy and financial markets. Particular in Kenya, it has led to significant reduction in income, a rise in unemployment, and disruptions in the transportation, service, and manufacturing industries arising from the disease mitigation measures that have been implemented.
It is therefore quite impressive that the Kenya Revenue Authority performed as well as it did in the 2020/2021 Financial Year.
In June 2021, collections totalled Kshs 174,669 million against a target of Kshs 171,885 million. This resulted in a performance rate of 101.6% against the target leading to a surplus of Kshs 2,784 million and a growth of 38.0%. With respect to Exchequer revenue, this totalled Kshs 164,471 million during the month against a target of Kshs 161,525 million, a surplus of Kshs 2,945 million. Exchequer revenues reported a performance rate of 101.8% and grew by 37.6%. Cumulatively, the financial year 2020/2021 (July 2020 - June 2021) collections amounted to Kshs 1,669,213 million against a target of Kshs 1,652,392 million. This led to a surplus of Kshs 16,821 million against the target. Revenues grew by 3.9% over collections in July 2019 - June 2020. On the other hand, exchequer revenue grew by 2.3% and recorded a surplus of Kshs 13,942 million. Had Treasury Undertakings amounting to Kshs 18,511 million been realized in 2020/21 then KRA overall revenue collection would have amounted to Kshs 1,687,724 million, translating to a performance rate against target of 102.1% (i.e., surplus of Kshs 35,332 million) and a growth of 5.0% over collections in the previous year. It is important to note that this is the first time KRA is meeting its overall target since 2013/14 and its exchequer target since 2007/08.
Customs and Border Control surpassed its June 2021 target by Kshs 353 million, driven by dry revenue (non-oil taxes) that accrued a surplus of Kshs 1,104 million - Oil taxes on the other hand recorded a deficit of Kshs 751 million.
It is worth noting that average daily dry revenue at Kshs 1,573 million registered in FY 2020/21 is the highest ever achieved in the history of KRA. In particular, average daily dry revenue averaged at Kshs 1,716 million in the period December 2020 - June 2021 up from an average of Kshs 1,380 million recorded in July - November 2020.
Further, Domestic taxes performance against target for June 2021 stood at 101.9% (i.e., surplus of Kshs 2,291 million) and recorded a growth of 38.6%. While Corporation tax and domestic VAT recorded above target performance in the month - accruing a combined surplus of Kshs 5,128 million - other key taxheads (PAYE, Excise duty domestic, Withholding income tax and Excise duty on Financial services) recorded below target performance accruing a combined deficit of Kshs 3,093 million. Detailed explanation of this performance is provided in subsequent sections of this brief.
In the month of June 2021, total collections in the Domestic Taxes Division amounted to Kshs 120,907 million against a target of Kshs 118,615 million, implying a surplus of Kshs 2,291 million. This performance translated to a growth of 38.6%. Amongst the major tax-heads, only Corporation tax and domestic VAT registered above target performance accruing surpluses of Kshs 4,799 million and Kshs 330 million respectively in the month. On the other hand, PAYE, Excise (Domestic), Withholding Income tax and Excise on Money Transfer recorded deficits of Kshs 995 million, Kshs 849 million, Kshs 638 million and Kshs 611 million respectively.
PAYE (Pay As You Earn) collections totalled Kshs 36,893 million (97.4% performance rate against target) in the month compared to Kshs 27,611 million collected in June 2020, translating to a growth of 33.6%. The performance is partly attributable to PAYE remittance from the public sector with a growth of 28.5% driven by payments from Counties and other government agencies.
Over this period, employee numbers grew by 7.5% in the month of June from 2.01 million employees in 2020 to 2.16 million employees in 2021, implying a growth of 150,962 employees. Sectors that recorded the largest growths in employee numbers include Agriculture, Forestry and Fishing with 26,656 employees; Education with 25,516 employees; Service Activities with 13,888 employees; Construction with 9,380 employees and Food and Accommodation with 6,909 employees. These sectors accounted for 54.5% of the growth in the number of employees for the month.
It is clear from this data that KRA, despite operating at sub-par levels even in terms of human resources due to CiViD-19 containment measures, was still operating at very high levels. Whatever strategies the Commissioner General and his team out in place during these challenging times should not be replicated on a higher scale to enable us significantly and progressively reduce our budget deficits to manageable levels and free up money for development.
In this Financial Year 2021/22, KRA will be beginning to execute its 8th Corporate Plan (2021/22 to 2023/24) themed ‘Revenue Mobilization through tax simplification, technology-driven compliance and Tax Base Expansion’. Their revenue mobilization focus will be achieved through strengthened compliance and enforcement, tax base expansion, risk-based audit, smart intelligence and investigation as well as integrated border management. With this new strategy implementation cycle combined with a robust system whose capacity we have already seen; it can only get better from here hoping that there will be minimal economic disruptions brought about by 2022 Election-related activities.
We cannot afford another year of disruptions to the economy brought about by election violence and/or uncertainty as this will take us back to 2017/2018 given that CoViD-19 continues to wreak havoc on our society.
Devolution & Governance Expert