Economy

KRA loses Sh7.7bn retail sector taxes on depressed sales

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A Tuskys branch in Nairobi. FILE PHOTO | NMG

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Summary

  • Treasury disclosures show total tax receipts from the wholesale and retail trade sector, which have been increasing by double digits in recent years, contracted to Sh53.81 billion from Sh61.29 billion the year before.

The Kenya Revenue Authority (KRA) lost Sh7.71 billion in collections from retail and wholesale traders such as supermarkets in the year ended June 2020 on the back of eroded consumer purchasing power amid reduced operating hours in the final quarter.

The Treasury disclosures show total tax receipts from the wholesale and retail trade sector, which have been increasing by double digits in recent years, contracted to Sh53.81 billion from Sh61.29 billion the year before.

The sector’s 12.58 per cent drop in revenue came at a time companies were struggling with flagging sales, which started even before the Covid-19 pandemic struck mid-March.

This was exacerbated by a curfew which resulted in scaling down of operating hours.

“People were very keen on saving. There were less trading hours because of Covid restrictions, which hurt sales for some firms, which used to even operate overnight,” said Willy Kimani, chief commercial officer at giant retailer Naivas Supermarkets.

“There were also market challenges where some of the bigger players have exited the market.”

The struggles in the sector, partly linked to mismanagement, saw Botswana retailer Choppies exit Kenya as the once giant Tuskys Supermarkets was pushed to the edge of precipice during the review year.

The sector has been amongst the fastest growing in generating revenue to the government, averaging growth of 24.77 per cent in two years preceding 2019-20 financial year, according to the KRA statistics.