Economy

Tax collection rises 24pc on end of reliefs

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Summary

  • Overall, the tax receipts in the eight-month period through February 2021 were Sh89.19 billion lower than the Sh995.38 billion collected in a similar period the year before.
  • The KRA will now need to collect Sh661.44 billion more in four months through June to meet the full-year target of nearly Sh1.57 trillion — a target which analysts at Genghis Capital forecast the taxman will underperform by about Sh208.3 billion.

Tax collections by the Kenya Revenue Authority (KRA) rose by almost a quarter in February,marking the first growth in 11 months, largely assisted by the withdrawal of special tax cuts put in place to cushion the economy from the impact of the Covid-19 pandemic.

Fresh data by the Treasury shows that last month collections increased by Sh23.58 billion to Sh121.29 billion or 24.13 per cent, compared with the same period a year ago. This was the first growth in KRA’s monthly collections since March 2020.

Revenue collection had been falling year-on-year since President Uhuru Kenyatta on March 25,2020 imposed a raft of restrictions to curb the spread of coronavirus, including a nationwide curfew and social distancing in public places, worsening matters for most firms that were struggling even before the virus struck.

The rise in revenue collection in March came in wake of reinstatement of maximum payroll and standard value added tax (VAT) rates to pre-Covid period levels of 30 and 16 percent, respectively, from January 1,2021.

Only workers earning a maximum monthly pay of Sh24,000 were spared with their take home remaining tax-free, but the Treasury compensated this by expanding the maximum of Pay As You Earn (PAYE) tax band to apply from Sh32,333 compared with Sh47,057 previously.

Unlike the corporation taxes whose impact will largely be felt from April when firms make quarterly instalments, the taxman started feeling the impact of PAYE and VAT in February as the law requires the dues to be filed and remitted by 9th and 20th of the following month, respectively.

Overall, the tax receipts in the eight-month period through February 2021 were Sh89.19 billion lower than the Sh995.38 billion collected in a similar period the year before.

The KRA will now need to collect Sh661.44 billion more in four months through June to meet the full-year target of nearly Sh1.57 trillion — a target which analysts at Genghis Capital forecast the taxman will underperform by about Sh208.3 billion.

“KRA has intensified compliance enforcement efforts by driving the implementation of the new tax measures,” KRA commissioner-general Githii Mburu said on January 15 in a revenue forecast report.