The Kenya Revenue Authority (KRA) expects to beat its initial revenue collection target for the current fiscal year by up to Sh140 billion, driven by an improved collection of consumption and income taxes as the economy continues its post-Covid recovery.
KRA Commissioner General Githii Mburu said his agency has exceeded two upward revenue target revisions brought in through supplementary budgets, pointing to the enhanced tax enforcement and recovery measures the taxman has been implementing in the period.
The 2021/2022 budget had set an ordinary revenue target of Sh1.77 trillion for the KRA, which was then revised to Sh1.8 trillion in the 2022 budget policy statement.
KRA has said in the past that it collects higher taxes in the last quarter of the fiscal year, as corporates including banks normally clear arrears from April.
“I believe we will be over the original target of Sh1.8 trillion by Sh140 billion. Right now we are above it by Sh126 billion, so we hope this month we can do another Sh15 billion, so it will be about Sh140 billion,” said Mr Mburu.
The higher collection however comes in an environment of rising cost of goods and services largely because of global supply constraints which have been exacerbated by the Russia-Ukraine war.
In addition to VAT, income, excise, and custom taxes, the KRA also collects other revenue such as levies, rent of buildings, fines, forfeitures, and other smaller taxes on behalf of the government.
The KRA has also been the principal revenue collection agent for the Nairobi County government since March 2020.
In the year ending June 2021, the KRA also exceeded its revenue collection target, raising Sh1.669 trillion versus an initial target of Sh1.652 trillion.
This was primarily driven by higher excise and corporation taxes, which offset a decline in VAT and payroll taxes.
This year, Treasury budget outturn documents as of March 2022 showed that the revenue body was ahead of target in the VAT and income tax categories by Sh10.8 billion and Sh17.8 billion respectively, signalling a recovery in consumption and payroll taxes on the back of the continued recovery of the job market.
Hundreds of thousands of Kenyans had lost their jobs in 2020 when the government imposed restrictions to curb the spread of Covid-19.
Trade was also negatively affected by global restrictions which affected supply chains and production, hitting revenue collection targets in the period.
With the lifting of the restriction measures, trade has picked up significantly, resulting in imports in the 12-months to March 2022 rising by 30 percent to a record Sh2.22 trillion, thus boosting custom and VAT revenue.
Higher petroleum prices have also factored into improved excise collection for the government.
The taxman has also been ramping up compliance enforcement measures to cut tax losses.
The agency said earlier this year that it would make extensive use of data and intelligence to unearth unpaid taxes and use technology to simplify tax processes.
It has also raised its pursuit of tax cheats, resulting in several high-profile businesses being hauled before court for non-payment of taxes.
New and enhanced tax rates introduced in the 2021/2022 budget have also helped the KRA raise more revenue.
Some of the new taxation measures this financial year include 16 percent levy on cooking gas, a raising of excise duty on airtime and data to 20 percent from 15 percent, the introduction of a 20 percent duty on fees and commissions earned on loans as well as a 7.5 percent tax on gambling wins.
The International Monetary Fund in April backed Kenya’s “important tax policy measures”, arguing they have resulted in “strong” collections.