Taxation Fails as Treasury Cuts Revenue Collection to KES 1.61 Trillion

The National Treasury of Kenya has readjusted its tax goal by cutting the revenue target by 5 percent to 1.61 trillion shillings.

The figure deviates from the 1.69 trillion shillings the Kenya Revenue Authority (KRA) had promised to raise in 2018 through mid-2019.

Kenya has missed its target of 1.415 trillion shillings, which has on two occasions been lowered. In the past financial year, it collected a total of 1.37 trillion shillings.

According to Deepak Dave, the founder of Nairobi-based Riverside Capital Advisory, the unwelcoming corporate incomes and job cuts constitute the overall economic cut resulting in a downward trend in the projection of net collections.

Dave says that the ineffective collection of taxes introduced during the year is another factor that has caused the readjustment.

Apparently, the Treasury’s aim of collecting more revenues by taxing poor Kenyans failed evidence by the International Monetary Fund’s (IMF) report that revenue collections were significantly lower than budgeted.

The report states that 0.4 percentage points of the gross domestic product (GDP) were realized, a figure which is lower than the previous fiscal year. This is despite the adjustment of the Value Added Tax (VAT) to inflation and imposing new taxes on petrol, mobile data, money transfer, and housing.

The first five months of the fiscal year through November saw the country’s tax income increase by 9.2 percent to 555.7 billion shillings. A total of 254.2 billion shillings of the whole income was spent on public debt service. Now the expectation is that 870.6 billion shillings will be repaid in the full-year period.

According to projections, 92 billion shillings is expected to be collected monthly since the amount already collected is but a third of the target set for 2019. This means that by June next year only 1.1 trillion shillings will have been collected.

All factors indicate that the country’s economy is broke, it has no money for taxation, which indicates that there is a chance of collecting less than the set amount.

Incomes are falling and considering how the Treasury has been setting seemingly over-ambitious revenue figures and banking on unreliable revenue sources, Kenya might just continue borrowing and further sink into debts.

Robert Shaw, an economist says that the government has a tendency of inflating revenues and that what is collected doesn’t fit the Treasury’s budget. And for these reasons, some experts say that the Treasury has no idea what it is doing.