Markets & Finance

Tax revenue hits Sh500bn in seven months to January

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The Kenya Revenue Authority (KRA) headquarters. Casino owners have moved to court to object a move by the taxman to levy games and bets. PHOTO/FILE

Tax collections for the first seven months of the year have risen to just slightly shy of half-a-trillion shillings, representing 53 per cent of the Treasury’s budgeted tax revenue.

Income and expenditure numbers published by the National Treasury on Friday show tax revenue stood at Sh492.9 billion as at January 31, about Sh427.1 billion shy of the Sh920 billion total target for the year.

At the same point in the 2012/13 financial year, tax revenues stood at 49 per cent of the full-year target, reflecting an improved performance for the taxman.

The Sh920 billion target excludes agency fees that the Kenya revenue Authority (KRA) collects on behalf of the government (totalling Sh61.2 billion as per end of January), including the 1.5 per cent railway development levy.

Tax experts said the new VAT law has boosted tax collection, with tighter controls by KRA on revenue collection also bearing fruit.

“We have seen the new VAT law bring back items that were previously zero-rated and tax-exempt into the tax bracket. There has also been an improvement in collection of revenue by KRA through bringing in more people under the tax net,” said RSM Ashvir managing partner Ashif Kassam.

In mid-January KRA on announced that it had surpassed the half-year revenue collection target, raising Sh600 million more than the Sh470.2 billion target set for it by the Treasury in the first six months of the 2013/14.

“Tighter enforcement of valuation procedures focusing on risk-prone cargo were among the factors that contributed to the improved performance,” said KRA Commissioner-General John Njiraini during the announcement of the half year revenue collection figures.

READ: Treasury sets record revenue collection target for KRA

The revenue growth will ease the Treasury’s fears of a possible under-performance, which could force the government to borrow more money to plug its Sh330 billion budget deficit.

The figures published in the Friday gazette also showed the Treasury’s disbursements for recurrent government expenses stood at Sh481.3 billion, against an annual projection of Sh937.7 billion, representing a disbursement of 51.3 per cent for the first seven months of the financial year.

The health ministry has exhausted it full budget of Sh16.46 billion, which could however be attributed to erroneous release of the ministry’s funds to county governments.

The Ministry of Interior and Co-ordination of National Government had taken up 48.3 billion out of a vote of Sh89.2 billion, and that of Education Sh54.6 billion out of a vote of Sh77.4 billion.

The development budget has taken a total of Sh104 billion out of a total allocation of Sh258 billion.

The Devolution and Planning ministry took up the biggest slice at Sh20 billion (out of a Sh46 billion vote), with the Transport and Infrastructure ministry second at Sh16 billion out of an allocation of Sh44.9 billion.

KRA has raised possible red flags that could impact on the revenue collected from VAT in the second half of the year.

KRA said it suspected under-valuation of imports by traders of some goods that were previously zero-rated so as to pay lower taxes to protect their profit margins- especially mobile phones and computers.

Rope in landlords

In a further effort to widen tax collection, Mr Rotich announced in December that KRA would intensify the audit of large tax payers with focus on VAT compliance.

“We have intensified the auditing of large tax payers, broadened coverage of excise taxes and streamlined customs services,” said Mr Rotich in a letter to the International Monetary Fund.

The taxman has also been ramping up efforts to rope in more landlords and property owners into the tax net.

ICT secretary Fred Matiang’i announced on January 27 that’s state agencies are putting together a comprehensive digital register of assets showing physical addresses and their owners, a move expected to nab tax cheats.

The register, dubbed the National Spatial Data Infrastructure Programme is expected to bring under the tax net more landlords, who are required to pay taxes on rental income.

Dr Matiang’i said the register would be compiled by collating data held by utility companies, pension funds, county governments, banks and insurance companies who are custodians of some of the assets.