Revenue Collection Expected To Decline By 2.1 Percent

Total revenue collections are expected to decline by 2.1 percent to 1.85 trillion shillings from the 1.89 trillion shillings as per the FY’2019/2020 supplementary budget estimates II.

According to the supplementary budget, the decline in revenue collection will be driven by a 1.3 percent decline in ordinary revenue to 1.62 trillion shillings from an estimated 1.64 trillion shillings in the supplementary budget estimates II.

Key to note, as of 31^st March 2020 ordinary revenue receipts stood at 1.2 trillion shillings equivalent to 70.3 percent of the target during the period of review and consequently, the revenue target for FY’2019/2020.

It is doubtful that KRA will meet its target given the current economic conditions and fiscal measures put in place by the government to cushion citizens and businesses against the effects of the Coronavirus pandemic earlier in the year.

In recent years there has been underperformance in revenue collections as highlighted in the chart below, and the Government has not been able to meet its revenue target with the worst year being FY’2017/2018 where it only managed to raise 89.6 percent of the targeted total revenue.

The continued underperformance has been attributed to ambitious revenue targets set by the Government masking the true budget deficit position.

The 1.85 trillion shillings revenue estimate is, however, a 0.28 billion shillings downward revision from 2.13 trillion shillings as per the 2020 Budget Policy Statement which in effect shows the reality of subdued revenue but still ambitious given the current economic conditions.

There is the projected decline in ordinary revenue by 1.3 percent to 1.62 trillion shillings from 1.64 trillion shillings in FY’2019/2020 estimate mainly due to the projected decline in revenue from income tax by 7.0 percent to 0.69 trillion shillings from 0.74 trillion shillings in FY 2019/2020 estimate.

The lower income tax revenue is expected to be as a result of the fiscal measures such as lowered resident income tax rate from 30.0 percent to 25.0 percent implemented to help cushion citizens against the adverse effects of the coronavirus pandemic, the increased unemployment that is to affect the PAYE.

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