Taxpayers queue outside Kenya Revenue Authority offices in Nairobi to file returns last year. Four months to end of the fiscal year and the taxman has a huge revenue collection gap. Photo/File
What you need to know:
Although most revenues come in the last quarter, collecting Sh365 billion in four months may be a formidable task for tax authorities.
The Kenya Revenue Authority has just four months to collect Sh365 billion if the government is to meet the fiscal year’s revenue target.
The Finance ministry’s Statement of Actual Revenue and Net Exchequer Issues February 2013 puts total collection at Sh452 billion out of the Sh817 billion goal for 2012-2013.
Economists though said that normally most revenues come in the last quarter as companies begin to declare their end-of-year results, which rapidly closes the revenue collection gap.
The Sh365 billion may, however, be a formidable task for tax authorities.
“It is clear that the revenue targets may have been a bit ambitious,” said Kwame Owino, the chief executive officer of think-tank Institute of Economic Affairs.
Samuel Nyandemo, an economics lecturer at the University of Nairobi, said that political uncertainty linked to the polls and petitions makes raising the targeted amount a Herculean task. Normalcy is expected to return after the Supreme Court decides petitions challenging the presidential results declared two weeks ago.
If the court rules against the IEBC declaration of Uhuru Kenyatta as the President-elect, Kenyans will go back to the polls in sixty days, which will keep the economy on a slow motion mode for longer than earlier expected. This may hurt the tax targets, say analysts.
“Given that we have four months to go the government may not meet its target because of political uncertainty,” said Dr Nyandemo.
Analysts said that the KRA missing its revenue collection target will result in the government either borrowing more from the domestic market, cutting its expenditure or both, which sets the stage for tough choices.
Cutting expenditure will mean fewer roads, dams, power lines and other infrastructure being rolled out this year since salaries, a recurrent expenditure, have to be paid.
The government’s wage bill has already increased by at least Sh40 billion after teachers, medical practitioners and lecturers successfully went on strike to secure salary increases.
“A difficult decision will have to be made by Parliament and the Treasury and it is time we had a debate on the size of government that we want,” said Mr Owino.
Implementing the Constitution, budgets for the national and county governments, have increased the national budget to Sh1.2 trillion, a figure which Dr Nyandemo said is bloated. Overall, the statement of account shows that the government’s account had Sh652 billion against the Sh1.2 trillion budgeted for this year.
A shortfall in non-tax income, grants and from international bodies, other governments have contributed to the gaps.
The KRA has been increasing revenue collection since 2003 but financial needs are outpacing the agency’s efforts courtesy of bigger financing needs from salaries and infrastructure development.
National Taxpayers Association (NTA) national co-ordinator Martin Napisa said that tax compliance is low and KRA can still meet if not surpass the target.
“There are so many people who are not paying taxes such as landlords and we should be talking of a trillion collection,” said Mr Napisa.
Should the gap between what is needed and what is available continue to grow it will mean the government having to rely more on donor financing, in the absence of trimming the national budget, he said.
