EDITORIAL: KRA’s missed collection targets a wake-up call

What you need to know:

The business environment in Kenya has been harsh and one cannot anticipate any worthy contribution to the economy under such circumstances.

The revelation that the Kenya Revenue Authority (KRA) once again missed its collection targets in the just ended financial year, mainly due to underperformance of payroll and corporate income taxes, does offer the clearest signal that the economy is in difficult territory.

The National Treasury’s conclusion is that these two tax categories contributed most to KRA’s aggregate revenue shortfall of Sh124.6 billion for the 2017/18 fiscal year against a target of Sh1.49 trillion. This points to the fact that despite the rosy growth figures that have been recorded in the past four years, business continues to struggle – profits falling with huge job losses.

The relationship between corporate productivity, employment and economic development is a symbiotic one and decision makers should always keep an eye on sustaining an enabling environment to guarantee progression.

The business environment in Kenya has been harsh and one cannot anticipate any worthy contribution to the economy under such circumstances. To stem a looming economic turbulence, those charged with managing the economy need to make a few hard decisions.

First, a quick solution must be found to the high cost of energy (petroleum and electricity) and credit, which directly affect economic productivity, to end the perennial cycle of missed tax revenue targets.

Secondly, the Treasury must be realistic with its budget plans and quit the debt-driven expansion path it has been walking in the recent past.

Revenue forecasts must be real and in conformity with the prevailing economic realities to avoid scenarios where targets are set based on wild ambition, and are missed, leaving borrowing as the only option to run government.

Finally, the State must find a lasting and effective solution to revenue leakage, pilferage and theft of the very scarce resources it manages to collect and invest in viable project with good returns to improve the health of public finance. It is encouraging that the Treasury has moved to create a new agency to vet and approve new public projects valued at more than Sh100 million. This should help address some of the challenges arising from unrealistic budgets and eliminate useless spending that only strain the taxpayer.