Taxman in a tight spot to net Sh920bn new revenue target

 

The Kenya Revenue Authority (KRA) commissioner-general, Mr John Njiraini (second right), commissioner for domestic taxes Alice Owuor (right) during the authority’s revenue performance report press briefing at the Times Towers on April 19. Photo/FILE  NATION

The Kenya Revenue Authority (KRA) commissioner-general, Mr John Njiraini (second right), commissioner for domestic taxes Alice Owuor (right) during the authority’s revenue performance report press briefing at the Times Towers on April 19. Photo/FILE  NATION

By GRIFFINS OMWENGA

In Summary

• One of the biggest challenges in hitting the new target will be whether Parliament will pass the Value Added Tax bill for 2012, which was shelved during sitting of the last Parliament after facing opposition from MPs on the ground that it would result to unwarranted increase in the cost of living.

The Sh1.6 trillion budget tabled on Thursday has put the taxman in a tight spot over tax collection because the government set a higher target despite missing the present one.

The government has set a Sh920 billion revenue target representing a 12 per cent climb from the Sh839 billion set to be raised by June 30 this year.

In budget estimates tabled in Parliament on Thursday by the majority leader of government and Garissa Town MP Aden Duale, it is this money that the Jubilee government will be banking on to fulfill its campaign promises, especially the provision of free solar-powered laptops to every child joining Standard One in public school from next year, free access to maternity healthcare as well as free milk programme to school-going children.

The challenge, however, is that the new revenue target comes against the backdrop of continued revenue collection shortfalls over the last five years.

In his budget last year, Finance minister Njeru Githae had set Sh845 billion revenue collection target for the taxman — equivalent to a 26 per cent rise over the previous year.

But the figure was later revised downwards midway the year to Sh839 billion after it became clear that the pace of economic growth in the country would not support such an ambitious target.

Even with the revised target, the taxman said, it is still too high owing to the fact that the country was unable to grow at 5.2 per cent as earlier predicted to post just 4.7 per cent jump thereby handing the revenue body a blow to revenue collection.

Last month, KRA announced that it had collected Sh560.3 billion, missing its target by almost Sh27 billion.

“Key economic parameters fell below expectations and adversely impacted performance. Our estimate is that deviations contributed over Sh26.9 billion to the revenue shortfalls over the last nine months,” said KRA commissioner-general John Njiraini.

Biggest challenge

At the moment, the taxman is facing a deficit of Sh279 billion with only three months before end of the fiscal year in June.

“The targets ought to be in sync with how the economy is growing otherwise the figures will always be lower than the expectations, said KRA deputy commissioner for marketing and communications, Mr Kennedy Onyonyi.

One of the biggest challenges in hitting the new target will be whether Parliament will pass the Value Added Tax bill for 2012, which was shelved during sitting of the last Parliament after facing opposition from MPs on the ground that it would result to unwarranted increase in the cost of living.

The Bill seeks to harmonise administration of the VAT Act by removing the exemption clause that has seen traders and manufacturers make a killing in filing for a tax refund. In so doing the Bill introduced a 16 per cent tax on fertiliser, maize flour, bread, wheat flour, milk and other basic commodities like books which were previously zero rated.

Mr Njiraini while speaking during the release of the third quarter revenue collection results early last month said the KRA has lost an estimated Sh11 billion in taxes because of the delay in enacting the Bill. The authority will also be hoping that the pace of economic growth picks up to boost revenue from the traditional tax bases.