Kenyas National Treasury and the Kenya Revenue Authority are
trading blame over missed revenue targets for the financial year
2016/2017, as policymakers explore plans to get more individuals and
businesses to pay taxes.
The move is expected to ease
pressure on about 2.5 million Kenyans currently employed in the formal
sector, who pay close to 30 per cent of their gross income as tax.
During
the financial year 2016/2017, revenue collection stood at Ksh1.36
trillion ($13.6 billion) against a revised target of Ksh1.43 trillion
($14.3 billion) resulting in a shortfall of Ksh70 billion ($700 million)
while the revenue shortfall linked to the original revenue target of
Ksh1.41 trillion ($14.1 billion) is Ksh50 billion ($500 million).
KRA
blamed a difficult operating environment, the National Treasury’s
missed macroeconomic forecasts and ambitious revenue targets for its
failure to meet its targets.
“The bulk of the shortfall is thus a target-setting issue,” said the taxman.
But the National Treasury said the tax collection agency must do more.
“KRA
is not struggling to collect revenues. You may find that there are
debts they (KRA) have not collected or some audit they have not
completed,” said Geoffrey Mwau, Director-General at the Budget, Fiscal
and Economic Affairs Department at the National Treasury.
The EastAfrican
has learnt that the National Treasury’s over optimistic forecast of the
country’s economic performance during the 2016/2017 financial year
cost the exchequer Ksh6.2 billion ($62 million) in lost revenue.
The
National Treasury’s other policy decisions such as duty-free
importation of essential foods (maize, milk and sugar), reduced excise
duty rates on cigarettes, enhanced remission of excise duty on locally
manufactured beer and dissolution of land control boards that froze land
transactions and affected stamp duty performance, led to a combined
Ksh13 billion ($130 million) in revenue losses.
Recently,
the National Treasury hinted at a shift in taxation policy towards the
informal sector — about 80 per cent of the country’s total workforce to
expand its tax base and shore up its revenue collections.
Dr
Mwau said the Treasury will review all income tax proposals dating back
two years once the on-going review of the Income Tax law is completed.
“We want every income tax proposal looked at in a comprehensive manner,” he said.
“We want every income tax proposal looked at in a comprehensive manner,” he said.
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