Despite a 10.2 percent growth in tax collection as compared to the previous financial year, Kenya Revenue Allocation did not manage to reach its target of 328 billion Kenya shillings in its first quarter target.
Missing the target with 28 billion shillings less, the authority has so far blamed it on the government freezing recruitment on companies hence less manpower to generate expected revenue, stiff competition from Chinese and India products, dropping of corporate taxes as large companies posted lower earnings due to higher financing costs.
KRA collected 65 billion shillings from Pay As You Earn (PAYE) as salary related taxes hit the 10 billion mark. According to the Authoritys Commissioner, business has been submitting lower corporate taxes paid in installments due to a drop in earnings. This lead to drop in the payroll tax growth which stood at 10.2 percent.
KRA miss their target for the first quarter? Haha, expect a crackdown and more harassment now.
— Shamit Patel (@just_sham_it) October 30, 2015
Another factor is the freeze of Public sector wage increments’ and weak growth in large corporate sector payrolls standing at 3.4 percent. With this kind of drop, the government has sought the services of McKinsey,an international consultant to help stop further losses KRA records show that the taxman has been facing a growing tax disputes mountain worth Sh105 billion and appeals valued at Sh75 billion waiting to be heard by the tribunal. Some Sh30 billion worth of fresh cases are in court.
Mr Njiraini said he did not expect to recover the lost Sh10 billion due to the delayed passing of the excise duty law that is currently before Parliament.
The Bill seeks to widen the base for taxable goods while introducing a flat tax of Sh200, 000 for car imports. He defended the recommended tax on imported cars, arguing that it will lead to higher collections despite being lower than what the KRA previously collected from expensive cars.
On his side, Treasury secretary Henry Rotich said he hoped to raise an estimated Sh20 billion from the tax tribunal that is expected to start operations next week, following the gazzetment of regulations that shall govern it.
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