Economy

Excise duty beats target despite fuel taxes freeze

kra

Times Tower in Nairobi, the headquarters of Kenya Revenue Authority (KRA). Picture taken on Thursday, October 15, 2020. PHOTO | DENNIS ONSONGO | NMG

The taxman surpassed its target on excise duty for the second quarter of the year despite a court order that froze an increase in petroleum taxes.

Latest data from the National Treasury shows that tax receipts from the sale of excisable goods amounted to Sh65.25 billion against a target of Sh58.25 billion in the October-December 2021 period.

The 12 percent or Sh6.998 billion target overshoot came amid a court injunction obtained by two Kenyans — Isaiah Odando and Wilson Yata — on September 27, barring the Kenya Revenue Authority (KRA) from increasing the excise duty on diesel and petrol until their case is determined.

The High Court last week extended the order prohibiting the KRA from increasing excise duty on petroleum products.

“As the petitioners have established a prima facie case, it will be unfair to the citizens of this country for this court to allow the introduction and levying of the impugned taxes since the citizens will not be able to recover such payments in the event the Petition is successful,” Justice Anthony Mrima ruled. “Conversely, in the event the Petition is unsuccessful, the State still has the machinery to raise more taxes.”

KRA charges Sh21.95 duty per litre of super petrol, while diesel and kerosene attract a tax of Sh11.37, rates which were to be adjusted by 4.97 percent from October 1 in absence of a court action.

The Times Tower on November 2 raised duty on about 30 excisable goods such as beer, spirits, bottled water, juice, cosmetics, airtime and internet use as well as motorcycles (boda bodas) to reflect the average annual inflation for the year ended June 2021.

The inflation-adjusted taxation is expected to generate an additional Sh3.7 billion in the year to June.

Treasury data shows excise duty collection for the half-year period through last December exceeded the target by Sh8.98 billion to nearly Sh123.6 billion on the back of easing of Covid-19 restrictions, including the lifting of nighttime curfew on October 21, last year.

The overperformance has also been mirrored in Value Added Tax (VAT) which overshot the goal by Sh22 billion to nearly Sh249.3 billion, while payroll receipts also surpassed the target by Sh9.8 billion to Sh219.6 billion in the half-year period.

“The iTax has made it hard not to comply when it comes to consumption taxes such as VAT and even excise duty because once you make a transaction you have to declare the taxes,” Stephen Waweru, a senior manager for tax services at consultancy and audit firm KPMG, said.

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