Job cuts leave taxman with Sh34bn hole

Job losses affected nearly all sectors including retail, manufacturing and financial services

National Treasury secretary Henry Rotich. file photo | nmg 

IN SUMMARY

  • Job losses affected nearly all sectors including retail, manufacturing and financial services.
  • Official data shows the huge plunge in payroll collection led to an overall tax collection of Sh908.94 billion against a target of Sh960.41 billion.
  • Failure to hit the official target is expected to further compound financial stress in a year that Kenya is grappling with a number of contingency expenditures ahead of the General Election.

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Job cuts and freeze in new hiring pushed the taxman’s payroll collection down by Sh34.24 billion below the official target in the nine months to March.

The Treasury’s third quarter economic review indicates that the Kenya Revenue Authority (KRA) netted Sh217.75 billion in pay-as-you-earn (PAYE) tax against an ambitious target of Sh251.98 billion.

Key segments have put on hold hiring of new staff as political uncertainty persists ahead of the August 8 polls.

The economy has also witnessed a string of job losses in recent months affecting nearly all sectors. 

The job cuts have been witnessed from retail to manufacturing and financial services sectors.

READ: Company CEOs see more staff layoffs in the next six months

Soft drink manufacturer Coca-Cola, retail chain Nakumatt, which has announced plans to trim its branches, and Kenya Airways #ticker:KQ, that is implementing austerity measures, look set to shed more jobs.

Similarly, a number of banks have sent home employees in recent months, among them Bank of Africa, Standard Chartered #ticker:SCBK, Ecobank, Family Bank, Sidian, and lately KCB Group #ticker:KQ, citing a difficult operational environment in the era of interest rate ceilings.

Official data shows the huge plunge in payroll collection led to an overall tax collection of Sh908.94 billion against a target of Sh960.41 billion.

That represents a shortfall of Sh51.4 billion below the KRA target set for the nine months at the start of the current financial year.

The tax collection, however, presents a 15.4 per cent growth at the total of Sh804.92 billion that the taxman collected in a similar period last year.

“By end of March, total cumulative revenue including appropriation-in-aid amounted to Sh908.9 billion against a target of Sh1.05 trillion,” the Treasury states in its update

Failure to hit the official target is expected to further compound financial stress in a year that Kenya is grappling with a number of contingency expenditures ahead of the General Election.

Only last week, the country announced plans to subsidise millers at the tune of Sh6 billion to enable them produce and supply maize flour to Kenyans at a lower retail price of Sh90.

The ongoing heavy rains have also destroyed basic infrastructure and precipitated waterborne diseases like cholera in Nairobi and other parts of the country raising demand for emergency funds.

According to the quarterly data, the KRA managed to beat collection target on VAT on charged local goods. The agency collected Sh140.7 billion, or Sh5.9 billion above the official target of 134.8 billion.

But at nine-month collection level of Sh115.4 billion however, the VAT on imports missed its target by Sh9.8 billion.

The data shows collections of excise duty levied on manufactured products also overshot the target by Sh160 million at Sh121.4 billion.

READ: Toyota cuts workforce under early retirement

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