Blow to KRA as tax revenue falls by 12 percent in July

Tax collected in the first month of the 2020/21 financial year declined by 12.1 percent to Ksh.94.5 billion from Ksh.107.5 billion last year.

According to the National Treasury statement of actual revenues and net exchequer issues as of 31 July non-tax income meanwhile rose Ksh.1.4 billion from a lower Ksh.308.6 billion.

Combined ordinary revenue in the period totalled to Ksh.95.9 billion or 11 percent off last year’s tally of Ksh.107.8 billion.

The slump is largely attributable to recent macroeconomic headwinds which feature a general slack in economic activity coupled by recent tax incentives by government.

“Traditionally, the review month has been a slow month in ordinary revenue mobilization and as such, untangling the Covid-19 impact on actual out turn would be a daunting affair,” noted analysts at Genghis Capital.

A depressed economic environment has resulted to job shedding and company closures, denying the taxman key income streams while tax incentives including the lowering of the effective VAT rate has further shrunk its basket.

The impact of the pandemic and policy change has been seen in KRA’s annual tax mobilisation efforts to June 2020.

From its Ksh.1.573 trillion in ordinary revenue collection which was way off the original Ksh.1.877 trillion target, domestic VAT had fallen by a sharp seven percent in the period.

Further, domestic excise duty collection which include fees leveled on betting, alcohol and tobacco industries was down by 6.4 percent while fuel taxes declined by a marginal 1.4 percent.

KRA is however still expected to mobilize a total of Ksh.1.633 trillion by the end of June in 2021 including Ksh.1.568 trillion as tax revenue and Ksh.66.1 billion in non-tax income.

The current macroeconomic environment is expected to define collections in the current year.