Taxman, Treasury in blame game over missed revenue target
Thursday August 03 2017
The Treasury building in Nairobi, Kenya. Recently, the 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. PHOTO | FILE |
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.
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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.
READ:Kenya seeks $1.5b for budgetary support, shilling cushion