Kenya Revenue Authority (KRA) has surpassed its revenue collection target for the second month running since Covid-19, managing Sh142 billion against a target of Sh138 billion. This collection indicates a 6.7 percent growth over the same period last year.
The success rate was 102.6 per cent and met their target by Sh3.53 billion for the first month of the year.
KRA collected more than Sh166 billion in taxes in December 2020, exceeding the target of Sh164 billion – a 101.3 percent success rate.
Why the growth despite the tough economic times for many Kenyans?
Kenya Revenue Authority attributed the two months of positive results to the revival of the economy.
According to the Kenya National Bureau of Statistics’ Quarterly Gross Domestic Product Report, the economy contracted by 1.1 percent in the third quarter of 2020. This was an improvement from a contraction of 5.5 percent in the second quarter of 2020.
Additionally, according to James Mburu, the
KRA Commissioner General, the relaxation of the stringent Covid-19 containment measures has driven this performance. This is in addition to the implementation of the Post Covid-19 economic recovery strategy 2020-2022 by the government. He has also attributed the performance to the sustained implementation of enhanced compliance efforts by KRA in the month of January 2021.
The different Tax collection increase
Taxes on foreign trade increased the Customs and Border Control Department’s collection to Sh54.9 billion in the month. It’s a noted rise of 9.7 percent, and a revenue surplus of Sh6.053 billion.
“The customs revenue was achieved through a sustained daily average of non-oil revenue at Sh1.7 billion compared to Sh1.744 billion in December 2020, which was the highest ever daily average collection for customs revenue. Exemptions and remissions in customs declined by 4.8 per cent, positively impacting the revenue base by Sh283 million.”
Domestic taxes also showed better output at 97.1 percent of the target. It was the best return since the start of the Covid-19 pandemic, albeit short of meeting the monthly target. After experiencing a decline of 10.4 percent in December 2020, the department reported an improved growth of 5 percent in January 2021.
Excise domestic taxes increased by 42.8%. This is after raising a surplus of Sh3.422 billion, while withholding tax met the target by Sh396 million, a rise of 8.2%.
Pay As You Earn (PAYE) taxes, showing a rise in jobs coming into the new year, reported an output at 98.6 percent.
Corporation taxes, levied on resident businesses, reported a 44.4 percent increase in revenue collection. This was a 119.4 per cent performance rate against the target, increase of 93.5 per cent from the December 2020 performance rate.
Domestic Value Added Tax (VAT) remittances grew by 8.5%. After a decrease of 19.8 per cent achieved in December 2020, this was a huge improvement. As companies continue to turn transactions to sales, efficiency is expected to further increase.
Expected revenue acceleration
The tax authority expects revenue collection output to further accelerate within projected rates. This is the implementation of the Post Covid-19 Economic Recovery Plan 2020-2022.
Mburu said that the economic growth is projected to bounce back at 6.4% in 2021. This is from the projected growth of 0.6% in 2020. KRA remains positive on the response of revenue to the economic resurgence.
KRA says that as it increases its tax base, it will continue to develop compliance enforcement efforts. It will guide the introduction of the new tax measures. This includes; Digital service levy, minimum alternative tax and voluntary transparency programmes are current conditions.
It will also concentrate on trade facilitation and enhanced enforcement. KRA will continue to play a critical role in maintaining revenue performance. This is by conducting post clearance audits, and review of the end use of exempt products. Also, conducting comprehensive audit of exemptions, profiling and targeting, enhanced scanning and intelligence-led verification of import freight.
“In addition, KRA will also continue to escalate its fight against tax evasion and leverage on technology to support tax collection. These among other measures will support enhancement of revenue collection and ensure economic sustainability in the country.”