Economy

KRA unlikely to recover Sh1.5trn uncollected revenue

KRA

Kenya Revenue Authority (KRA) Commissioner General Githii Mburu. PHOTO | DIANA NGILA | NMG

The Kenya Revenue Authority is unlikely to recover 94.4 per cent of the Sh1.6 trillion that taxpayers owe it in uncollected revenue.

The taxman says out of an outstanding revenue balance, Sh1.51 trillion or 94.4 per cent is considered uncollectible and doubtful.

The KRA says out of the outstanding debt of Sh1.6 trillion, only Sh90 billion or 5.6 per cent is estimated to be collectable.

A report tabled in Parliament shows that the uncollectible debt increased by Sh142 billion in the year to June 2021.

Auditor-General Nancy Gathungu says the revenue accountability statements of the KRA reflect an outstanding revenue balance of Sh1.601 trillion compared to Sh1.459 trillion reported as of June 2020.

READ: KRA exceeds its revenue target by Sh149bn

This means that the KRA failed to collect Sh142.103 billion in the 12 months to June 2021.

The growth in the uncollected revenue comes at a time the government is struggling to raise enough revenue to plug the budget deficit which stands at Sh846 billion in the current financial year.

The revelations by the Auditor-General also come at a time President William Ruto has ordered austerity measures that will result in an Sh300 billion budget cut for the current fiscal year.

Dr Ruto sanctioned the austerity plan on the recurrent expenditures of ministries, departments, and agencies (MDAs) in 2022/2023 year which largely targets foreign travel, training, and motor vehicle and furniture purchase budgets.

READ: KRA to collect extra Sh3bn from beer, juice, water taxes

The radical budget cuts are expected to impact the fortunes of several businesses, including motor vehicle dealerships, furniture manufacturers and suppliers, media and advertising agencies, hotels and caterers as well as oil marketers.

The government is hard-pressed for resources to finance its essential projects in the wake of harsh economic times that have impacted revenue collection.

The KRA has struggled to bring more people into the tax brackets and curb tax cheating and evasion in the quest to meet targets in an economy where government income has consistently failed to meet targets.

Ms Gathungu says the KRA management indicated that validating the Sh1.6 trillion uncollected debts, as a pre-requisite for updating taxpayers' ledgers, is ongoing.

The KRA told auditors that various measures have been put in place with a view of reducing the debts.

“These measures include implementing aggressive debt recovery initiatives, enhanced manual reconciliations, the vacation of erroneous debts, enhanced and comprehensive cleaning and validation processes on taxpayers records,” Ms Gathungu said in a report on KRA revenue statements account for the year to June 2021.

The report, tabled in Parliament, shows that the KRA management is also rolling out the debt module in the iTax to transform debt processes.

Other measures that the KRA is putting in place to reduce the piling uncollected revenue include the establishment of a full-time project team to fast-track debt validation of legacy system debts, and strengthening of the tax appeals.

“However, should the strategies implemented fail to yield results, the outstanding revenue balance will keep on increasing as indicated,” Ms Gathungu warned.

The taxman has 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.

A harsh economy has impacted key sectors, meaning that the taxman has struggled to net sufficient collections.

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