Half year tax revenues down 13.6 per cent at Ksh.673.6 billion

The National Treasury has reported a 13.6 per cent slump in tax collected through the first six months of the 2020-21 financial year to December 2020.

According to data from the Treasury’s statement of actual revenues and net exchequer issue as of December 31, tax revenues stood at Ksh.673.6 billion in contrast to Ksh.779.3 billion in December 2019.

The slump in collections is greatly attributable to economic disruptions occasioned by the COVID-19 pandemic which continue to drive down collections for the Kenya Revenue Authority (KRA).

For instance, tough COVID-19 restrictions including a night-time curfew have disrupted the full-scale operation of business forcing company closures and mass layoffs.

The consumption of alcohol which makes for crucial tax flows to government has also been greatly contained under the limited operation of bars and other entertainment joints.

During the same period, tax relief measures including a lowered pay as you earn (PAYE) rate and a lower rate of value added tax (VAT) at 14 per cent also contributed to the revenue slide.

Meanwhile, non-tax revenues which represent fines and other levies collected by the KRA were down 32.6 per cent at Ksh.52.9 billion in contrast to Ksh.78.5 billion at the same stage in 2019.

The National Treasury alongside KRA are nevertheless hopeful of a turnaround in the New Year supported in part by a rebounding economic environment and new tax heads.

Last week for instance, KRA reported the first positive flows in revenue collected since the start of the pandemic during the month of December as collections grew by 3.5 per cent to Ksh.166 billion (inclusive of levies left out by the exchequer).

“The improved performance is attributed to the economic recovery following the relaxation of the stringent COVID-19 containment measures and enhanced compliance efforts by KRA in the month of December,” said KRA commissioner General Githii Mburu in a statement.

New tax heads including the digital services tax (DST) and the minimum tax are meanwhile expected to complement tax collections in 2021 with both taxes having taken effect on January 1.

The slump in revenue collections have caused a strife in the National Treasury with Cabinet Secretary Ukur Yatani revealing hardships in funding government operations including transfers to counties.

“Due to the adverse effects of COVID-19 and subsequent containment measures that have generally slowed down the pace of economic activities, the disbursements to counties are indeed falling behind,” he said in a statement issued on January 14.

The exchequer is however confidence of reversing the trend in lower disbursements of funds to different budgetary functions under the rebounding macro-economic environment.

KRA is mandated to raise Ksh.1.567 trillion in tax revenues by June and Ksh.66.1 billion in non-tax revenues.

The tax man is therefore tasked with raising an estimated Ksh.893 billion in the next six months to match up the target set after revisions to cover shortfalls occasioned by the COVID-19 pandemic.

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