New internet, phone call taxes increase collections 31 percent

Tax collections in the first two months of the financial year jumped 31.42 percent, reflecting a recovery in economic activities and the impact of new taxes on phone calls, internet use and loans.

The Kenya Revenue Authority (KRA) collected Sh247.18 billion in July and August against Sh188.08 billion in similar period a year ago, Treasury Secretary Ukur Yatani reported in revenue data last Friday.

The Sh59.10 billion growth in taxes came on the back of progressive recovery in economic activities such education and tourism, which were grounded to a near halt last year as public health authorities enforced measures to stem spread of coronavirus.

Kenya was hit hard at the onset by the pandemic, but its economy has been picking up after posting a contraction of 0.3 percent in 2020.

The jump also came on the back of a rise in excise duty on airtime and data to 20 percent from 15 percent, reintroduction of the 16 percent value added tax on cooking gas and a 20 percent excise duty on the fees and commissions earned on loans in July.

The impact of the new taxation measures for July were felt in August as the law requires VAT and excise tax receipts to be filed and paid by 20th of the following month.

The Treasury data shows August taxes grew 34 percent to Sh125.35 billion compared to last year, higher than 28.87 percent climb in July’s collections to Sh121.83 billion.

ABOVE TARGET

“Through the (taxation) reforms that we have put in place in the last few months, the Kenya Revenue Authority has been performing beyond the target. Every month, we have collected closer to Sh5 billion above the target,” Mr Yatani said on September 9.

“This is very positive, meaning we are going to have ability and the will to finance our budget and reduce borrowing. We want to continue reducing our budget deficit to enable us live within our means.”

The Treasury data, however, shows that expenditure on debt repayments grew at a faster pace of 60.72 percent to Sh162.37 billion in the two months of this fiscal year from July compared to a year ago.

6PC GROWTH

This means an equivalent of 65.69 percent of tax receipts went into servicing debt compared with 53.72 percent in the prior year.

The Treasury has been bullish on economic outlook, projecting a growth of more than six percent this year compared with a 0.31 percent contraction last year, partly boosted by recovery in education activities.

“We are now back to business, schools are on and a lot of activities revolve around the education sector. So, we are very confident that these are going to contribute to our economic growth,”Mr Yatani said.