KRA's missed targets explained

The Kenya Revenue Authority (KRA) may be unable to collect more taxes because its pool of taxpayers mostly includes students, the jobless and pensioners.

Audit and consultancy firm Ernst&Young says the National Treasury has been banking on tax projections based on the number of Kenyans with Personal Identification Numbers (PIN) to increase revenue collections.

However, most of these new taxpayers are still in school and can't make contributions.

“Basing collections on the number of taxpayers more than growth is a bad thing because even students require a PIN to access loans. If you use this to assess revenues, then projections will be fundamentally flawed,” Christopher Kirathe EY tax partner said yesterday.

Mr Kirathe urged the Government to instead look at the quality of the taxpayer since just basing it on the number is not commensurate to tax growth.

There have been concerns that Treasury overestimates its projected revenue targets mainly because its data contains more people who are unable to pay tax or are making losses in business.

This may have informed push to have everyone file returns including nil returns by students so as to clean the data. Students who don’t are accumulating fines of up to Sh20,000 on late failing as well as subsequent penalties.

KRA embarked on deleting inactive PIN numbers in 2017 so as to get a clearer picture of who qualifies as a capable taxpayer. At the time, the taxman held 10.6 million Kenyans with PINs, but only 5.8 million taxpayers were registered on the iTax platform.

KRA has indicated that only 3.94 million actually pay tax as it moves to double this figure to seven million by implementing a segmented approach to deal with the identified sectors.

KRA has also had difficulties increasing taxes in line with GDP growth or with the introduction of new taxes, missing the targets set by Treasury every year.

The economy has grown at an average of 5.5 per cent yet tax collection has been declining to a decade low in 2017.