KRA misses revenue collection target by a small margin

KRA commissioner-general John Njiraini. FILE PHOTO | NMG
KRA commissioner-general John Njiraini. FILE PHOTO | NMG  

Revenue collection for the financial year ended June 2017 fell short by a marginal 0.8 per cent, the taxman reported yesterday, offering some relief to the Treasury’s borrowing targets.

The Kenya Revenue Authority (KRA) said it collected a record Sh1.365 trillion in the 12 months against a target of Sh1.376 trillion set by the Treasury.

The collections were 13.8 per cent more than the Sh1.21 trillion the KRA received the previous year, largely attributable to increased inflows from consumption taxes.

KRA commissioner-general John Njiraini said the growth in revenue in the 2016/17 financial year was the highest in the last three years, and compares well with five-year average growth of 14.3 per cent.

“FY 2016/17 performance compares well with prevailing economic indicators, including GDP [gross domestic product] growth of 5.5 per cent and average inflation rate of 8.1 per cent, the latter which mainly affected food items exempt from taxation,” Mr Njiraini said in a statement.

“The FY also recorded weak growth in cargo import traffic, a phenomenon witnessed across all the EAC economies, and which adversely impacted customs revenue.”

The taxation revenue has nearly doubled in five years from Sh707.4 billion in the financial year 2011/12, and now accounts for 19.3 per cent of Kenya’s national wealth, or the GDP.

Mr Njiraini said the country’s ratio of taxation to GDP was the second highest in non-oil economies in Africa, and beats the average for the five-nation East African Community bloc where the average is 14.8 per cent.

Collections from value added tax (VAT) posted the largest growth at 21.2 per cent year-year, nearly matching its four-year average growth of 21.5 per cent, the taxman said without revealing the exact figures.

The strong performance is attributed to expansion of withholding VAT framework which now covers in total 3,231 large taxpayers, coupled with robust growth in construction and telecommunications.

Domestic excise tax collections rose 13.3 per cent, supported by 13.29 per cent inflows from beer and cigarettes.

“The major contribution to excise growth was enhanced compliance brought about by improved enforcement through the Excisable Goods Management System (EGMS), especially for the spirits sector where annual growth reached 22.7 per cent in FY2016/17,” Mr Njiraini said.

“Following the gazettement of fresh regulations to address past industry concerns, KRA plans to extend EGMS application to other sectors, including bottled water, juices and carbonated drinks during 2017/18.”

Corporation tax grew by 18.2 per cent, the strongest growth in four years, with key sectors meeting or exceeding their targets. Banking, for example, posted 20.1 per cent growth, but manufacturing and electrical power generation registered the weakest growth.

Payroll taxes, however, experienced a growth of 7.9 per cent compared to previous four-year average of 12.5 per cent, with the depressed performance partly attributed to expanded tax relief granted in January 2017 through widening of tax bands.