Treasury sets record revenue collection target for KRA

The Treasury has set the bar higher for the taxman in the next financial year, according to estimates tabled in Parliament.

The Kenya Revenue Authority (KRA) is expected to collect Sh880 billion in the next financial year or 22 per cent higher than the current year’s target — making it the most ambitious target in the agency’s history.

Estimates of Revenue, Grants and Loans show that non-tax revenue is expected to fall by 1.4 per cent to Sh38.9 billion compared to a 51.8 per cent increase to Sh44.9 billion in the current financial year ending on June 30.

Collections by ministries and departments (including from external donors), otherwise called appropriation-in-aid, are expected to fall to Sh67.3 billion from Sh69.6 billion this fiscal year.

The total revenue — including taxes and other types of funding — for the National Treasury is expected to rise by 17.3 per cent to Sh986.2 billion, the highest ever planned to be collected in a single financial year.

KRA will have to be more aggressive in property tax collections to meet the Sh743.3 million target, which is 13.6 per cent higher than the revised estimates figure of Sh654 million.

The taxman could, however, find it difficult to get close to the target given that the actual collection of property taxes for the nine months to March this year stood at Sh453 million, 31 per cent or Sh201 million less than the Sh654 million target for the year.

(Read: KRA faces tough last quarter with Sh365bn tax gap)

Bridging the deficit in the three months to June would require the taxman to collect half of what it did in the first nine months of the financial year.

KRA has tried to hit its targets through aggressive enforcement of dormant legislation such as property tax laws but has met resistance from landlords.
The property owners have promised to increase rents if they were forced to pay tax on the income, causing public pressure to bear on the revenue authority.

Confederation of Trade Unions (COTU) secretary general Francis Atwoli said taxing landlords was ill-advised as it would adversely impact on the living standards of urban dwellers. KRA finally conceded that it was not in a position to map out buildings electronically citing huge funding implications.

Total grants for the new year are expected to stand at Sh67.2 billion, up from Sh55.3 billion – a 21.5-per cent rise. It is however important to note that foreign governments have not been prompt with the release of promised cash citing failure to meet pre-disbursement conditions.

The revenue estimates show that the Treasury expects domestic borrowing to drop to Sh106.7 billion in the new financial year from Sh164.9 billion or 35 per cent less than the revised estimates for the current financial year.

Domestic borrowing doubled in revised 2012-13 Budget from the previous financial year’s level of Sh83.4 billion. The amount of domestic borrowing was increased by more than Sh30 billion towards the end of 2012 when it became apparent that both tax revenue and donor receipts would fall short of expectations.

Taxes that are dependent on economic growth such as on corporate and personal income will grow by between 13 and 21 per cent in the coming financial year indicating the confidence that the Treasury has in the economy. GDP growth is projected at between five and six per cent this year.

Income tax from individuals paid at PAYE will rise to Sh249.8 billion from Sh207.4 billion in the revised estimates for the year ending June 30 – amounting an increase of 20.4 per cent.

The Treasury targets Sh204.3 billion from corporations, which is a 19.5 per cent increase from Sh170.9 billion in this financial year.

Tax on transactions involving second-hand vehicles at the point of purchase will rise to Sh550.5 million from Sh484.2 million, a growth of Sh66.3 million or 13.7 per cent.

Total value added tax revenue will rise by 13.5 per cent to Sh210.6 billion from Sh185.5 billion in this financial year. VAT collections have been falling behind target because large companies have crafted a way of avoiding it since the removal of withholding VAT two years ago.

The withholding VAT was removed because it had led to huge VAT refund arrears, amounting to Sh25 billion as at March this year. VAT refunds will amount to Sh14.68 billion, up from a target of Sh12.9 billion in the financial year that is about to end.

Excise taxes will rise by 26.5 per cent to Sh107.5 billion, up from Sh85.0 billion. With most of the excise duty on domestic goods coming from beer and cigarettes, it seems there is a high possibility of this being increased when tax measures are announced in June.

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