Michael Waweru bows out with Sh338 billion first half tax collection
Outgoing Kenya Revenue Authority Commissioner General Michael Waweru (left) and his successor John Njiraini at a past function. Photo / file
Mr Michael Waweru yesterday made his final announcement of tax collection numbers, indicating a 11.6 per cent growth in the first half of 2011/12.
The Kenya Revenue Authority (KRA) commissioner-general, who started the tradition of holding Press conferences to release revenue collection results, announced that Sh338.2 billion had been netted within six months and expressed optimism that second-half revenue would be higher.
“The second half is normally better than the first half. We are going to meet our target,” he said. Amongst the areas KRA is targeting for improved yields are self-assessments and the recently initiated Manifest Management System where customs demands lodgment of ship and port manifests to avoid evasion. Mr Waweru officially leaves office on March 4 after presiding over KRA for nine years in which annual revenue has risen from just over Sh180 billion to Sh635 billion last year. He will be succeeded by Domestic Taxes Department-Large Tax Payers Office (LTO) commissioner John Njiraini.
The outgoing Commissioner-General told the Business Daily he would take Mr Njiraini for regional orientation before going on terminal leave.
“I will take him around the regions first because LTO is largely based in Nairobi, then I will take my leave. But we will discuss that with my staff first,” he said.
The current fiscal year concludes KRA’s fourth corporate plan with a target of collecting Sh733.4 billion in both Exchequer and agency revenue representing an increase of 15.5 per cent over last year. On Tuesday, we reported the authority was working on the fifth corporate plan covering Mr Njiraini’s three-year term.
During a media briefing, KRA sought to counter reports suggesting that its collection was lagging behind expectations, saying that no country in the region had achieved 23.5 per cent of GDP ratio in collection.
“If it is true that we can collect Sh800 billion as suggested, that would translate to 47 per cent of the GDP…we are happy we are doing well in the region, but we can do better,” said Mr Waweru.
Kenya has the highest tax collection ratio in the region, which is roughly at the same level with South Africa, with Tanzania following at 15 per cent and Uganda at 11 per cent.
International Monetary Fund ‘tax effort’ calculation taking into account the informal and agriculture has suggested Kenya ratio should be about 18 per cent of the GDP.
Asked by reporters whether his tenure was a success, Mr Waweru said that was for third parties to decide. He noted that when the media asked him in 2003 what the potential collection of KRA was, he answered Sh300 billion.
“At the time I said if we can get multilateral donors off our backs that would be good. Those were the days donors used to land at the airport and address the Press only to talk about unmet conditionalities when leaving.”
He said KRA had succeeded in providing the government with the necessary funding for infrastructure development.
Mr Njiraini comes in at a time policy makers are pushing forward with the first major changes in the VAT Act since 1989, also the most radical overhaul of Kenya’s tax regime set to result in increased prices for many basic goods including flour and school textbooks. It will see the military and charities lose duty exempt status.
But he said the measures were necessary to avoid refund claims, which have risen to Sh23 billion.
He noted VAT as a per cent of total revenue had fallen from 40 per cent in 1990/91 to 29 per cent.
“This is because over time through policy and manufacturers’ and consumers’ lobbying we have given away taxes,” he said in reference to VAT Bill 2010.
KRA justifies the phasing out of the zero-rated goods—where manufacturers claim refunds from the government—saying this had never benefited consumers as prices never fall after zero-rating of goods.
Instead Mr Njiraini said the government should consider social interventions to cushion the poor.
Tax growth in quarter one 2011/12 was generally muted except for Domestic Taxes which grew by 12.3 per cent (see table for full half-year growth) with Road Transport Department returning negative growth.
Last half of the year was bedevilled by double-digit inflation, weak shilling drought and rising interest rates.
The six-month data show a 3.8 decline in petroleum taxes as the global crude prices rose pressuring down local demand.
“Excise duty on domestic products was affected by a substantial drop in production of excisable products,” said the KRA statement. The main goods attracting excise duty are cigarettes and beer and the statement is likely to be reflected in annual results of the relevant manufacturers. A fall in excise collection was also noted in airtime taxes as tariffs tumbled in the mobile phone industry.
VAT tanked 12.5 per cent as withholding tax was remitted as income tax. However trade taxes rose 15.3 per cent reflecting the weak shilling’s impact.
KRA in the six months recruited 37,679 new taxpayers.
