Economy

KRA misses tax target on slower economy

rotich

Treasury secretary Henry Rotich. FILE PHOTO | NMG

The taxman missed the collection target by Sh60.46 billion in the three months ended September on the back of a slowdown in economic activity and delayed implementation of some new tax measures.

The tax revenue stood at Sh320.311 billion against the Sh380.76 billion set by the Treasury, official statistics show.

Collections by the Kenya Revenue Authority (KRA) were, however, Sh15.38 billion or 5.04 per cent more than the Sh304.93 billion raised in the July-September period of 2017 which was clouded by a bruising presidential poll contest.

The KRA missed targets in income tax, value added tax (VAT), excise and import duty streams, Treasury secretary Henry Rotich said in the latest economic and budget review report.

Justice Wilfrida Okwany suspended implementation of a raft of new taxation measures at the beginning of July pending determination of cases by Kenya Bankers Association and activist Okiya Omtatah.

The petitioners had challenged enforcement of new taxes under the Finance Bill 2018 such as those on bulky bank transfers and petroleum products citing lack of public participation.

The taxes were also hit by reduced private sector activity during the quarter as measured by Stanbic Bank Kenya’s Purchasing Managers Index (PMI) which softened to an average of 53.63 compared with an average 55.60 in the previous quarter.

The taxman collected Sh159.11 billion from income tax, underperforming Mr Rotich’s target for the quarter by Sh32.02 billion.

Payroll taxes missed the target by Sh7.15 billion to stand at Sh89.8 billion, reflecting a sluggish growth in new job opportunities.

Other income tax streams such as corporation tax also fell short by Sh24.87 billion after standing at Sh69.31 billion, a 22.35 per cent drop compared with Sh84.8 billion a year earlier.

VAT collections stood at Sh92.64 billion, underperforming the target by Sh18.30 billion, the data shows.

KRA collected Sh40.59 billion from VAT on imports, Sh10.29 billion short of the target, while VAT levies on local products were Sh8.01 billion less than the Sh60.06 billion target.

Collections from excise duty underperformed the target by Sh8.9 billion to Sh42.8 billion, while duty on imports missed the Sh27 billion target by Sh1.24 billion.

“We estimate that consumption by the private sector was dampened, in particular during the latter period of the quarter. This was due to the expected inflationary pressure attributed to imposition of VAT on petroleum products,” analysts at Genghis Capital said in a report on November 11.