KRA hurts in worst year of job losses for workers

Kenya Revenue Authority (KRA) hurts in worst year for job seekers. (Photo: Courtesy) By Moses Michira

 

IN SUMMARY Kenya Revenue Authority missed its target of Sh89.6 billion by a fifth, the highest in at least 15 years The Treasury, however, said revenue collection during the period under review was 9.8 per cent better than last year’s. But when compared to the Gross Domestic Product, it was smaller Government ...revenues from workers’ income taxes have stagnated, in the surest indicator of a difficult job market amid a freeze in employment this year. Worst hit is the July-September quarter when the political season had peaked, hurting any prospects for new investments or expansion among existing companies.

ALSO READ: KRA board in a fix as Njiraini’s term ends without heir Official statistics contained in the National Treasury’s Quarterly Economic Budget Review show that the Kenya Revenue Authority (KRA) missed its target of Sh89.6 billion by a fifth, the highest in at least 15 years. Records for prior years are not readily available, raising the chance that the period could be the worst in history. Previously, the targets are missed by smaller margins or even surpassed as was the case in 2007. In essence, the State has started feeling the pinch from the sluggish economy as seen through the recent spate of layoffs as companies chopped their wage bill to remain afloat. The wave of job losses that characterised the better part of the year amid a tough operating environment as politicking took a toll on the country’s economy.

Overall, the taxman missed the target by almost Sh30 billion in the first quarter of this fiscal year, which the Treasury blamed on the subsidies offered on maize, milk and sugar imports to cushion consumers from the rising inflation.

“Ordinary revenue collection was Sh320.9 billion against a target of Sh350.8 billion, which was Sh29.9 billion below the target,” said the Treasury in the review. A research conducted by pollster Trends and Insights for Africa (TIFA) and job-listing site Brighter Monday, showed that one in every two Kenyans are currently unemployed with half of the jobless having been out of work the past one year.

ALSO READ: Taxman’s headache over illicit cash flows and transfer pricing Profit warnings “About half of those who are unemployed have been jobless for at least one year,” said TIFA Chief Executive Maggie Ireri during the survey’s release in Nairobi. The job losses are far from over as companies post dismal results in the third quarter and issue profit warnings.

In fact, Stanbic Bank’s Purchasing Manager Index showed that November job shedding quickened in the survey so far due to a combination of low turnover, insufficient funds and lower output requirements that reportedly prompted firms to reduce their staffing levels. KRA also missed its import duty collection target by Sh2.9 billion while revenue from Value Added Tax (VAT) on imports was Sh4.1 billion short of the projected target.

Excise duty, which is the tax charged on goods produced within the country, on the other hand, fell short by Sh5 billion, attesting to the challenges in the manufacturing sector. Income from Government ministries and departments, known as Appropriation in Aid A-I-A, was Sh12.5 billion less than anticipated. ALSO READ: Bad laws aiding firms in tax evasion By the end of September, total cumulative revenue, including A-I-A collected amounted to Sh345.6 billion against a target of Sh388 billion.

This is Sh42.5 billion shortfall. The Treasury, however, said revenue collection during the period under review was 9.8 per cent better than last year’s. But when compared to the Gross Domestic Product, it was smaller. “As a proportion of GDP, the total cumulative revenue and grants in the period under review amounted to 3.9 per cent compared to 4.2 per cent in the corresponding period of the financial year 2016/17,” said the Treasury.

The country risks running short of tax revenues, which would mean borrowing more money to plug the budget gap. The shortfall at the KRA has prompted the National Treasury to trim expectations of how much it expects to collect. The Treasury has cut back tax revenue projections by Sh60 billion. In its latest projection, the Treasury Cabinet Secretary Henry Rotich expects KRA to raise Sh1.439 trillion, down from Sh1.499 trillion spelled out in the budget. According to the latest Treasury projections, the fiscal gap is expected to be bigger at Sh691 billion, which would put it at 7.9 per cent of the GDP, up from Sh535 billion projected at the beginning of the year.

Rotich says the only way out would be to institute austerity measures and cut back on domestically funded infrastructure projects.

Development partners also turned off their taps during first quarter of the budget year, with grants, money given but will not be repaid, performing poorly. Donor valves also dried up during the period under review, with the Government getting a paltry Sh1.6 billion in external grants against a target of Sh10.8 billion, representing an under-performance of Sh9.2 billion. ALSO READ: KRA's new bid to make tax-evading multinationals pay