Markets & Finance

Taxman rakes in Sh227 billion in first quarter

kra pix

Times Towers, Kenya Revenue Authority headquarters. KRA has collected an improved Sh227 billion in the first quarter. PHOTO | FILE | NATION MEDIA GROUP

Kenya Revenue Authority has collected an improved Sh227 billion in the first quarter of the fiscal year but the Treasury still mostly relied on Eurobond proceeds to meet its expenditure requirements.

Fresh data released by the Treasury shows the tax revenue as at the end of September improved by 13 per cent from last year’s Sh201 billion. Other government revenue was a mere Sh3 billion.

However, in the three months, the Treasury remitted some Sh365.8 billion to pay for recurrent and development expenses by ministries and county governments. The deficit of Sh138 billion was mainly catered for by commercial loans.

The Treasury received the Eurobond money in September and immediately used it highlighting the cash crunch that had attended government operations over the past 18 months.

Kenya issued the Sh170 billion international bond June this year. It spent the proceeds to clear a Sh51 billion syndicated loan while the rest was used in September mainly to settle long-standing bills of government contractors.

READ: Relief for banks as Treasury pays contractors

Martin Kisuu, a tax expert at Taxwise Consulting, said going forward the government seems to be banking on success of structural tax changes to grow its local revenues and fund the deficit.

Last month, the government reintroduced capital gains tax that the Treasury hopes would bridge the budget deficit. KRA plans to issue guidelines on the tax that had been scrapped for close to two decades early next year.

READ: Kenya's president approves 5pc capital gains tax

The revenue collected in the three months is 21.6 per cent of the targeted annual collection of Sh1.05 trillion. The data, however, did not provide the components of the tax revenue which would make it easier to identify how the different tax departments were performing.

“Their business is also cyclical and this is their low period; the next two quarters are more productive,” said Mr Kisuu.

KRA will be under pressure to improve its administrative efficiencies as the loan repayments fall due. KRA is often accused of abetting major revenue leakages.

Recently, the taxman has turned focus on transfer pricing, a strategy used by global firms to reduce tax liability. The KRA expects to collect more than Sh25 billion from the multinationals following forensic audits on transfer pricing.

READ: KRA opens new battlefront with multinationals