Economy

KRA tax collections fall 15pc despite easing lockdown

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Treasury Secretary Ukur Yatani. FILE PHOTO | NMG

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Summary

  • Kenya Revenue Authority’s (KRA) tax collections for the two months to August dropped 15 percent to Sh188.08 billion, reflecting sluggish economic performance after easing Covid-19 lockdown restrictions.
  • Latest data by the National Treasury shows that tax collections dropped by Sh33.27 billion in the two months from Sh221.35 billion in similar period last year.
  • The drop reflects a subdued environment with below-par imports owing to low demand for goods despite the phased re-opening of the economy in July.

Kenya Revenue Authority’s (KRA) tax collections for the two months to August dropped 15 percent to Sh188.08 billion, reflecting sluggish economic performance after easing Covid-19 lockdown restrictions.

Latest data by the National Treasury shows that tax collections dropped by Sh33.27 billion in the two months from Sh221.35 billion in similar period last year.

The drop reflects a subdued environment with below-par imports owing to low demand for goods despite the phased re-opening of the economy in July.

Companies grappling with reduced revenues have also continued to shed jobs, cut salaries and sent workers on unpaid leave, further hitting KRA’ collections from sales and payroll.

Treasury Secretary Ukur Yatani responded to the decline by reducing revenue targets for the year to next June due to the prolonged effects of the pandemic and tax relief effected to cushion Kenyans from the adverse effects of the disease.

“The revenue projections for FY 2020/21 have been revised taking into account the revenue performance by end August 2020 and the prolonged effects of Covid-19 pandemic on economic activities and the measures put in place to curb its spread,” Mr Yatani said in the draft Budget Review and Outlook Paper.

The Treasury cut total tax collection forecast for this financial year by Sh91.2 billion to Sh1.42 trillion compared with the earlier estimates of Sh1.51 trillion in June.

Mr Yatani linked the revisions to the closure of bars and bans on mass gatherings amid uncertainty on when the facilities will be reopened. Alcohol and cigarettes that are largely sold in bars and restaurants, account for more than 75 percent of the tax collections.

Alcohol and cigarettes are among at least 31 products whose prices will increase from October 1 when the taxman reviews the excise duty to match the inflation rate for the year.

The Treasury had hoped that bars would be allowed to resume operations by September when Kenya was expected to have kept the coronavirus under firm control.

Businesses continued laying off workers despite an uptick in economic activities in the private sector as captured in a monthly survey by Stanbic Bank Kenya.