Taxman seeks Sh800 billion in five months

Treasury needs to raise over Sh800 billion in the next five months to meet its spending plan for the current financial year.

This is after the Kenya Revenue Authority (KRA) raised Sh897 billion in the first seven months, dealing a blow to efforts by the taxman to meets its target of Sh1.73 trillion for the year.

Although average tax collection in a month improved by Sh128.2 billion in the period under review, according to Treasury’s latest revenue collection update released last Friday, increased spending wiped out these gains.

Plugging the revenue gap in the next five months to the end of the financial year remains a tall order given the struggling economy that is on a slow recovery.

National Treasury in its latest Budget Policy Statement has already hinted at doing a mini-budget that will see the target revised downwards from Sh1.73 trillion.

Treasury Cabinet Secretary Ukur Yatani also noted that the ministry will continue monitoring revenue collection after they fell short of the six-month target to December 2019.  

“Should the shortfall in collection persist, further expenditure rationalisation will be effected in the context of Supplementary Budget II,” said Yatani in the 2019 Budget Policy Statement.

Even as it realised Sh897 billion in taxes, the National Treasury spent Sh1.42 trillion plugging the deficit with loans mostly from local investors.

However, tax collected as of January this year was an improvement of Sh91.7 billion compared to the same period last year.

However, with expenditure on wages, pensions, payments of debts, development and counties increasing by Sh207 billion, the Government was forced to look into other sources of revenues.

As a result, Treasury borrowed Sh304.7 billion in domestic loans, with the Exchequer looking to tap more from the local market to avoid the pitfalls that come with foreign loans such as exchange rate risks.

Treasury is yet to borrow from the external credit market.

In the first seven months of the 2011/19 financial year, the Government had borrowed Sh234.4 billion by issuing Treasury Bills and Treasury Bonds.

Non-tax revenue, which includes fines and other fees to various regulatory bodies, went up by Sh39 billion, with the State netting Sh81.6 billion from such revenue.

Among some of the taxes that KRA will be banking on to help it attain this target is the turnover tax on small businesses with revenues of less than Sh5 million in a year.

KRA, Yattani said, had been given all the necessary support, including financial, in a bid to enable it to meet the initial target of Sh1.8 trillion by the end June, which was later revised to Sh1.7 trillion.

In the first half of the current financial year, tax collection grew by 16 per cent compared to a growth of 12 per cent in December 2018.

This growth, said Treasury, was driven in part by a rebound effect of various tax heads, after the poor performance in the previous financial year.

“Despite the growth, cumulative ordinary revenue fell short of the target by Sh138.7 billion.

The shortfall was due to underperformance in all broad categories of ordinary revenues with income tax recording the highest shortfall on account of lower than targeted performance in both Pay as You Earn (PAYE) and other income taxes.”