- Covid-19 lockdowns witnessed revenue dipping by more than 21 per cent, with subsequent improvement as restrictions eased in subsequent years.
- This is another positive indicator that the taxman focused in enduring that it meets its revenue collection.
In the realm of fiscal affairs, the Kenya Revenue Authority has emerged as a beacon of hope, witnessing a remarkable surge in revenue collection. Clocking in at Sh107 billion, this figure surpasses its performance for the initial five months of the preceding financial year.
With collections reaching an impressive Sh963 billion against a target of Sh1 trillion, KRA's ascent from last year's Sh867 billion during the same period signifies a significant milestone - surpassing the Sh1 trillion mark within the first half of the fiscal year.
Analysing the first quarter's performance, where KRA garnered Sh586 billion, up from last year's Sh541 billion, one can anticipate a continued positive trajectory in subsequent quarters. Notably, recent data highlights tremendous growth in October and November, signifying a resilient push forward despite the prevailing tough economic environment.
An emerging revenue stream in the form of the fuel levy has contributed substantially, amassing Sh127 billion since its implementation on July 1. Despite a pending court case against the Finance Act 2023 impacting its potential, the existing legislation aims to bring in an additional Sh214 billion, coupled with an expected Sh20 billion from the EAC customs law.
This new law has already contributed Sh62 billion, positioning itself as a transformative force in revenue growth. Moreover, VAT has shown a promising uptick of more than 20 per cent compared to the previous year's performance.
Significant strides in domestic tax performance, amounting to Sh621 billion against a target of approximately Sh680 billion, indicate a commendable 16.3 per cent increase. Customs and border control gathered Sh339 billion, narrowly missing the target by Sh50 billion. These figures indicate growth comparable to the pre-Covid-19 period, where overall growth averaged about 13 per cent.
Notably, Covid-19 lockdowns witnessed revenue dipping by more than 21 per cent, with subsequent improvement as restrictions eased in subsequent years. This is another positive indicator that the taxman focused in enduring that it meets its revenue collection.
The impressive growth extends to various tax heads, with Pay As You Earn showcasing a 9.7 per cent increase this month compared to the same period last year. While remittance of PAYE from private firms grew by 13 per cent, public sector remittance grew at slowed rate of 4.7 per cent.
This is said to have been affected mainly by below optimal exchequer remittance to various devolved units and agencies. The remittance of PAYE from private sector came in handy having been largely driven by introduction of the 32.5 per cent and 35 per cent duty bands through the Finance Act 2023.
This is because more than 70 per cent of the income earners within these bands are employees in large private firms. However, private sector remittance was negatively impacted by drops in employee numbers from a number of firms. The sectors most affected were manufacturing, construction, administrative and support, agriculture, wholesale and retail trade and service, among others.
Additionally, the housing levy - a new tax stream - has exhibited promising returns, contributing Sh5 billion this month, nearing the set target. If paid as stipulated, the levy could add Sh30 billion annually to the revenue kitty.
Other strategic initiatives like tax amnesty, raking in more than Sh7 billion in under two months, signal positive momentum in revenue performance in the country. This, coupled with indications that taxpayers have so far committed an additional Sh11 billion under the tax payment plan, forecasts even better collections by the end of the financial year.
While administrative measures by the taxman have demonstrated efficacy, ongoing efforts are necessary in the face of adverse economic conditions. The upcoming full rollout of the electronic tax information management system in the ensuing financial year is expected to bridge tax gaps and enhance taxpayer inclusion.
So far the system has been a key tool in facilitating tax compliance for VAT registered taxpayers. The system has provided a technological solution that is simpler, more convenient and flexible for taxpayers.
KRA has also integrated betting and gaming companies to its system to enhance compliance in this sector. The integration is aimed at streamlining tax remittances from the sector, with the aim of scaling up revenue mobilisation and collection. The programme has so far enabled KRA to make significant improvements on tax administrative processes in the sector, with the daily visibility of the firms providing trends that inform compliance measures.
With a targeted revenue of Sh2.8 trillion by the end of the financial year 2023-24, KRA stands poised to achieve a substantial portion of the projected revenue. The proposed national tax policy, focusing on uniform application of reliefs, VAT reforms and periodic tax law reviews, holds promise in tackling challenging sectors.
Despite prevailing economic challenges, the outcomes of tax measures in the Finance Act 2023 and KRA's revenue reforms position the taxman for continued success if the current pace is sustained.
The writer is an economist