KRA fails to Meets its Half-Year-Target Once More

The Kenya Revenue Authority has once again failed to meet its half-year target by 20 billion shillings, after the taxman collected 623 billion shillings against the set target of 643 billion shillings.

According to a treasury document that was submitted to the parliament, by the end of December 2016, total cumulative revenues, including Appropriations in Aid collected, amounted to 674 billion shillings against a target of 701 billion shillings. In total, Government revenues fell short by 27 billion shillings, including KRA collections and Appropriations in Aid (A-I-A), which is income from State departments and agencies.

The tax man’s collection of Pay As You Earn (PAYE) missed the target by Sh17 billion shillings, with the agency raising 144 billion shillings from formal workers. The economy has witnessed a spate of job cuts across the private sector, as well as a freeze in employment in Government. Unforeseen disruptions caused by labor action, including among medical workers and teaching staff, are expected to also affect KRA’s PAYE collections. Further, new income tax bands took effect in January in an effort to give overburdened taxpayers some relief. Tax relief

The new bands that will impose a graduated tax rate from 10 per cent for subordinate staff to 30 percent for entry level staff to highly paid executives will put more money in workers’ pockets, but reduce KRA’s collections.

The revised income tax law also dampens KRA’s hopes of making more money, with a general increase in tax relief from 13,944 shillings a year to 15,360 shillings a year. KRA also underperformed in the collection of Value Added Tax (VAT) on imports by 10 billion shillings, netting 68 billion shillings. Import duty was also off-target by 3 billion shillings, with KRA collecting 42 billion shillings in six months.

On the positive side of things, the investment revenue and tax on consumer goods were impressive, bringing in an additional 9 billion shillings and 7 billion shillings, respectively. The Railway Development Levy, set at 1.5 percent of the value of imported goods, also netted 13 billion shillings against a target of 9 billion shillings.

The treasury has set a 1.3 trillion-shilling target for the 2017/18 budget and for this reason, KRA will be forced to ensure that they have raised a total of 677 billion shillings by the end of the financial year. More to this, they have been given a higher target of 1.5 trillion shillings in the financial year starting July 1, 2018.

Related: Treasury Projects Tax Revenue of 1.5 Tn from 1.38 Tn FY 2016/17