Economy

Corporate tax exceeds KRA target by Sh3bn

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Times Tower, KRA headquarters, in Nairobi. FILE PHOTO | NMG

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Summary

  • KRA collected Sh79.69 billion in the July-September period from taxes payable on income, profit and capital gains by corporations and enterprises against a target of Sh76.64 billion.

Taxes from company profits surpassed the Treasury’s target by Sh3.05 billion in three months ended September, indicating businesses recovered from Covid-19 economic hardships at a faster pace than projected.

The Kenya Revenue Authority (KRA) collected Sh79.69 billion in the July-September period from taxes payable on income, profit and capital gains by corporations and enterprises against a target of Sh76.64 billion.

The corporation taxes over-performed the Treasury goal at a time business deals in the private sector as measured by the Stanbic Bank Kenya’s Purchasing Managers Index (PMI) averaged 54.5 against an average of 42.38 in six months through June 2020.

PMI readings above 50 denote growth while those below point to a contraction in activity in private firms.

The corporate deals in the review quarter were boosted by increased operating hours, removal of inter-county movements and resumption of international commercial passenger flights, which lifted exports.

Despite authorities progressively easing Covid-19 restrictions in the July-September period, firms generally maintained cost-cutting measures such as redundancies, pay cuts, unpaid leave and a freeze on non-priority expenditures such as marketing and advertisement.

The PMI findings — based on feedback from corporate managers in key economic sectors such as manufacturing and agriculture — showed workforce count only started growing in October.

Corporation taxes between July-September, however, represented a 3.43 per cent drop compared with Sh82.52 billion collected in the corresponding quarter a year when firms were paying 30 per cent tax on earnings. The Treasury cut the corporate income tax rate to 25 from 30 per cent late April to cushion businesses from pandemic shocks.