Betting firms, reduced investments deny KRA Ksh.1.77 trillion target


Betting firms, reduced investments deny KRA Ksh.1.77 trillion target
KRA offices in Nairobi's Times Tower. PHOTO | COURTESY

In Summary

  • In spite of the notable gain in revenue yields for the year, the improved collection from Ksh.1.44 trillion in the preceding period sits 11 percent off the budgeted Ksh.1.77 trillion registered in the 2019 budget policy statement fiscal framework.
  • The notable performance in revenues however does little to offset ordinary revenue as a share of GDP as the tax share in comparison to GDP slides to a flat 18 percent from 18.5 percent
  • KRA is expected to raise a total of Ksh.1.9 trillion in ordinary revenues from the current financial year as the National Treasury seeks to tap more gains from within as the scope for credit financing remains on the contraction.

The Kenya Revenue Authority (KRA) has announced a new Ksh.1.58 trillion tax collection record for the period closing June 30,2019 to keep with the taxman year on year growth.

In spite of the notable gain in revenue yields for the year, the improved collection from Ksh.1.44 trillion in the preceding period sits 11 percent off the budgeted Ksh.1.77 trillion registered in the 2019 budget policy statement fiscal framework.

The outright face-off between the taxman and betting firms over the adoption and implementation of withholding tax on customer winnings put the heaviest dent on targets, contributing to the largest share of shortcomings to the presented tax policies in the financial year.

“Tax policies raised Ksh.48.2 billion compared to a forecast of 62.9 billion. Thus revenue shortfalls from tax policy accounted for Ksh.14.7 billion or 23 percent of the overall revenue shortfall. Non-compliance with withholding tax on winning betting provisions is the principle course of this shortfall,” read part of KRA’s annual revenue performance report for the 2018/19 fiscal year.

At the same time, a significant reduction in company investments which soared by nearly three-fold in the negative saw the undermined growth for the lump-some tax head as hiccups in the recovery of corporations from the tapered growth of 2017 remained evident.

The tax however witnessed a late turnaround as the performance of commercial banks was reinvigorated in the fourth quarter of the 2018/19 financial year, jumping by nearly 30 percent in comparison to a 7.9 percent slide in the preceding three quarters.

Petrol tax

KRA reaped big gains from the enactment of the controversial value added tax (VAT) on petroleum products to the tune of eight percent to see the tax man’s oil linked revenues surge by 16.3 percent as the new tax propped up the charge by Ksh.17.2 billion.

The figure however lay beneath the targeted Ksh.35 billion levy for petroleum as the additional VAT taxes effectively led to a dip in the use of the commodity by consumers.

The up-scaling of salaries in the public sector saw the pay as you earn (PAYE) income tax priced segment strengthen by 4.5 percent during the year, countering drawback effects from the widening of employee tax bands which saw the revenue base shrink by Ksh.6.1 billion.

Meanwhile, domestic excise taxes surged by 12.3 percent even in the face of a slow down in both the output of beer and cigarettes, items which contribute largely to the local excise charge.

Domestic VAT on the other-hand mirrored the expansion in economic output as withholding taxes notably in the public sector grew by a 12.3 percent margin.

Shortfall

The notable performance in revenues however does little to offset ordinary revenue as a share of Gross Domestic Product (GDP) as the tax share in comparison to GDP slides to a flat 18 percent from 18.5 percent as per provisional output data from the Kenya National Bureau of Statistics (KNBS).

The tax man has however tipped data driven revenue mobilization change to scale up the revenue basket to a GDP share of 19.2 percent by the close of 2020/2021 financial year.

KRA’s seventh corporate manifesto entails the interlocking of the Integrated Financial Management Information System (IFMIS) and iTax with view to weed out tax non-compliance.

Further remedies cover the fast tracking of tax dispute resolution and enhanced scanning to detect concealment of taxable goods.

In the year, the taxman recovered a total of Ksh.25.7 billion from a combination of tax evasion cases won and from the prosecution of suspect.

KRA is expected to raise a total of Ksh.1.9 trillion in ordinary revenues from the current financial year as the National Treasury seeks to tap more gains from within as the scope for credit financing remains on the contraction.

The tax man hopes to scale up his efficiency in closing in on Treasury targets as years’ of missed revenue ambition continue to haunt the revenue authority.

“With enhanced operational efficiency as embedded in the ongoing KRA transformation, we are optimistic that the landscape of revenue mobilization and collection in this country will be completely changed,” said KRA Commissioner General Githii Mburu.

The National Treasury has empowered the KRA tax-collection abilities with the recently proposed policies through the 2019/2020 budget.

This includes the raise of capital gains tax from five to 12.5 percent and the introduction of withholding tax on services offered on a commercial basis at the rate of five and 20 percent on residents and non-residents respectively.

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Story By Kepha Muiruri
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