NAIROBI,Kenya, July 3 – Despite the economic challenges brought about by the global COVID-19 pandemic, the Kenya Revenue Authority (KRA) has defied all odds to surpass its revenue target for the first time in eight years, since financial year 2013/14.
Revenue collection in the financial year 2020/21 reached a new record of Sh1.669 trillion compared to Sh1.607 trillion collected in FY 2019/20.
The FY 2020/2021 revenue target as reflected in the 2021 Budget Policy Statement was Sh1.652 trillion, which KRA surpassed with a surplus of Sh16.808 billion.
This represents a performance rate of 101 percent and revenue growth of 3.9 percent compared to the last Financial Year.
This performance is consistent with the prevailing economic indicators, especially the projected GDP growth of 0.6 percent in 2020, said Commissioner General Githii Mburu on July 3.
He said KRA also recorded a milestone after revenue collection more than doubled in the last 10 years from Sh707 billion in FY 2011/12 to Sh1.669 trillion in FY 2020/21 representing a growth of 136 percent in the last ten years.
Mburu said the exchequer revenue grew by 2.3 percent with a collection of Sh1.544 trillion compared to Sh1.510 trillion collected in FY 2019/20 and represents a performance rate of 100.9 percent against the target of Sh1.530 trillion.
“The performance of Sh1.544 trillion is before accounting for Sh18.5 billion that the Treasury has undertaken to pay on behalf of taxpayers for various reasons including economic hardship,” he said.
Mburu said the Domestic Taxes Department (DTD) collected Sh1.039 trillion during the financial year translating to a performance rate of 99.8 percent while Customs and Border Control (C&BC) collected Sh624.77 billion surpassing its target of Sh606 billion representing a performance rate of 103.0 percent and recording a surplus of Sh18.248 billion.
Petroleum taxes amounted to Sh226.680 billion posting a growth of 34.5 percent and a surplus of Sh12.252 billion against a target, while Non-oil revenue recorded a growth of 16.4 percent with collections amounting to Sh398.089 billion which was above target by Sh5.996 billion.
In a statement, Mburu said the tax head recorded a growth of 3.7 percent in FY 2020/21.
“This performance was driven by increased remittance from Energy, Agriculture and Construction sectors with a growth of 222.7 percent 33.1 percent and 31.9 percent respectively. This is despite the reduction of the tax rate from 30 percent to 25 percent in the first half of the financial year.”
In PAYE, tax head declined by 9.3 percent in FY 2020/21, a drop from an average growth of 2.0 percent recorded during the same time last year.
He said the decline was driven by a reduction in the employment rate emanating from measures taken by mainly private firms to reduce operating costs as a result of the Covid-19 pandemic.
The tax head was also affected by the reduction of the top PAYE rate from 30 percent to 25 percent and a 100 percent tax relief for persons earning below Sh24, 000 per month.
On Withholding Tax, the tax head recorded a growth of 3.8 percent in FY 2020/21, which is a drop from an average growth of 18.2 percent recorded last year. The performance was negatively impacted by depressed economic growth due to the impact of the Covid-19 pandemic.
In Domestic Excise the tax head recorded a growth of 12.0 percent in FY 2020/21, compared to a decline of 6.4 percent recorded in the last financial year.
Mburu said the performance turnaround is attributed gradual reopening of the economy and extended operating hours for bars and restaurants.
Domestic VAT recorded a decline of 7.9 percent.
“The performance of the tax head was primarily affected by the COVID-19 pandemic, which saw business turnovers decline. The decline was also affected by the reduction of the VAT rate from 16 percent to 14 percent,” he said.
According to Mburu, during the period under review, KRA implemented a number of Revenue Enhancement Initiatives that enabled them to enhance revenue collection.
This was largely driven by enhanced compliance enforcement efforts and the implementation of new tax measures focused on ensuring that that non-compliant taxpayers pay their tax due.
“The good performance is also attributed to Tax Base Expansion (TBE) which was a key deliverable in the 7th Corporate Plan. Through this initiative, KRA recruited more taxpayers through the newly implemented taxes including Digital Services Tax, Minimum Tax, and Voluntary Tax Disclosure among others.”
Over the 7th Corporate Plan period, active taxpayers increased from 3.94 Million to 6.1 Million.
The introduction of Alternative Dispute Resolution (ADR) also saw taxpayers come forward to find an amicable solutions in disputes with KRA, he said. With the main objective being to ensure, faster, objective and efficient resolution of tax disputes, ADR enabled KRA to unlock Sh31.435 Billion in taxes out of 552 cases resolved during the FY 2020/2021.
The enhanced recovery of tax arrears saw KRA mobilise Sh93.7 Billion in the FY 2020/2021 compared to Sh84. 7 Billion collected in FY 2019/2020.
The technology investment made by the Authority over the years was instrumental during the peak of the pandemic. “Technology platforms drove revenue mobilization through data-led compliance management frameworks. The automation of KRA processes, especially during the Covide-19 pandemic, enabled the Authority to improve taxpayers’ services and subsequently collect more revenue.
KRA implemented the use of a Mobile Service (M-service) the platform for specific tax administration processes, registration, tax filing and payment of some tax obligations and enquiry services. During this period, all goods declared under the Single Customs Territory framework were monitored using the Regional Electronic Cargo Tracking System (RECTS) and all Customs related inquiries and applications were also processed online.
The CG said also entrenched a performance management culture which enhanced accountability and productivity of the staff, thus driving the strong financial year performance.
KRA has also intensified its fight against tax evasion to ensure revenue is not lost.
In the Financial Year 2020/2021, KRA adopted stakeholder engagement as a key pillar in its business processes with a view of building strong partnerships as foundations for trust, which is key for voluntary tax compliance.
This made KRA more approachable and ready to dialogue on issues pertinent to stakeholders. This approach was productive, not only in enhancing good relationships with taxpayers but also in providing new ideas and innovations useful for improving the tax environment and revenue collection.
The Authority also collaborated with other agencies including being part of the multi-agency team, which support in sealing revenue loopholes.
Mburu said KRA 8th Corporate Plan targets to collect Sh6.831 trillion by the end of Financial Year 2023/2024.
The projected economic recovery of 6.6 percent in 2021, progressive tax policy frameworks, and a robust tax compliance mechanism, KRA is confident that it will achieve this target and enable the country to sustain its economy, he added.
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