Kenya Revenue Authority grows third quarter collection by 13.5pc
The taxman has registered a 13.5 per cent growth in the third quarter compared to the same period in 2010/11.
The Kenya Revenue Authority collected Sh160 billion, but is still unlikely to meet its 2011/12 target.
Tax revenues are projected to hit a total of Sh712 billion but fall Sh21.4 billion below the original target set by the Treasury.
Kenya Revenue Authority (KRA) commissioner-general John Njiraini attributed this to the Treasury’s interventions to reduce duties and taxes on petroleum and food products.
“The proposals in the 2011/12 Budget statement included the removal of excise tax on kerosene, continuing the stay of implementation of the Common External Tariff on rice to allow importation at 35 per cent as opposed to 75 per cent, remission of duty on imported wheat from 10 to zero per cent and remission of duty on imported maize for six months,” said Mr Njiraini on Thursday.
He was briefing the Press on the revenue collected in the third quarter of this financial year.
Though the target for the year may not be met, the revenue has increased to Sh160.4 billion in the third quarter – or by 13.5 per cent – from the same quarter of 2010/11 mainly due to growth in domestic taxes and customs services.
Mr Njiraini said delays in enacting the legislation on value added tax (VAT) had also adversely impacted expected collections.
“We had expected that the VAT Law would be in place by January this year and thereby improve collections. But this has not happened,” said Mr Njiraini.
The new law proposed to significantly scale down exemptions and zero-rating.
“On zero-rating, it is important to point out that no long-term solution to the VAT refund problem will be found unless a clear change in policy direction is taken.
Interventions made to KRA to improve administrative efficiency will not bear much fruit unless the rate of VAT refunds generation is addressed through a scaling down of zero-rating,” said Mr Njiraini.
He said the refund claims currently stand at Sh24 billion, and warned that this threatened to develop into a crisis akin to that of government pending bills that dated back to the Kanu era.
Mr Njiraini said that the Treasury proposed to remove the withholding of VAT last June because it had resulted in accumulation of refund claims and caused major disruptions to business cash flows.
In the third quarter domestic taxes rose by 17 per cent to Sh100.2 billion, while customs rose by 8.2 per cent to Sh59.6 billion and road transport by 2.2 per cent to Sh641 million.
The cumulative revenue collection stood at Sh498.6 billion in the nine months to March 31 this year compared to Sh444.5 billion collected in a similar period in the last financial year – a growth of 12.2 per cent.
Even in the nine months, the highest growth was in Domestic Taxes that rose by 13.9 per cent to stand at Sh315.2 billion, while Customs Services grew by 9.4 per cent to Sh181.4 billion. Road Transport collections rose by 3.3 per cent to Sh2.1 billion.
Domestic excise duty was adversely affected by shifting consumption patterns for beer with increasing preference for non-malt containerised brands, whose volume growth for the nine months stood at over 60 per cent, Mr Njiraini said. Excise tax on beer contribute to over half of the entire domestic excise taxes.
“A lot of people have shifted into taking the beer that comes in big jars, from the malted beers. This has caused a major revenue shortfall in that area,” said the commissioner general.
During the first half of the financial year, excise duty on mobile phone airtime also shrank due to price wars among service providers, following reduction of interconnection rates by the CCK.
