The Kenya Revenue Authority (KRA) collected a historic Sh220.6 billion from taxes last month buoyed by the release of billions of shillings in income tax dues for public servants by the government.
The tax collection for June has surpassed the previous record of Sh203.8 billion which was set in June last year.
KRA says that the stellar performance in the last month of financial year 2022/23 was driven by exchequer releases which saw the authority realise strong conversions, notably from public sector Pay As You Earn (Paye).
On the whole, Paye registered Sh494.9 billion in collections for the financial year 2022/23 with collections from the private and public sector reported to have grown by 10.7 per cent and 1.9 per cent, respectively, compared to the collection of the preceding financial year.
“The collections for June 2023 delivered a 98.1 per cent performance rate. Paye had been a bit slow for the public sector in 2022/23 but when it came to June the collection for that tax head hit 107.0 per cent performance because of exchequer releases. Sometimes these releases are done at the tail end and therefore we are not quite able to convert them and report in time”, KRA acting Commissioner-General Rispah Simiyu says.
KRA began the current financial year on a low note by collecting just Sh130.6 billion in tax revenue in July, which remains the lowest amount of revenue collected in a month in the financial year 2022/23.
The taxman went on to collect Sh149.62 billion in August, Sh184.94 billion in September, Sh142.75 billion in October and Sh150.63 billion in November.
Tax revenue hit a high of Sh194.05 billion in December owing to increased economic activities that came with that month’s holiday festivities before dropping sharply to Sh152.13 billion in January amid high inflation.
In February, the tax revenue collected by KRA shrunk further to Sh131.4 billion as inflation jumped back to 9.2 per cent slowing down consumption before bouncing back to hit Sh157.17 billion in March.
The tax agency went on to collect Sh167.18 billion in May, a significant drop from Sh180.22 billion that it collected in April.
KRA says that disbursements towards the settlement of pending bills were instrumental in the June 2023 performance given the impact that had in withholding tax collections by the authority.
According to the National Treasury, the total outstanding national government pending bills as of March 31, 2023, amounted to Sh537.2 billion.
During the same reporting period, the county governments reported pending bills of Sh159.7 billion.
“Withholding tax had also been struggling through the year but when it came to June, timely disbursement to the counties and settlement of pending bills and therefore whatever attracted withholding tax by way of business then saw KRA realising conversion”, Ms Simiyu says.
The roll out of the electronic Tax Invoice Management System (eTIMS) as the second phase of the transition from the Electronic Tax Register (ETR) to the Tax Invoice Management System (TIMS) and the requirement that effective June 1, 2023 all VAT registered taxpayers would be required to only accept electronic tax invoices from registered taxpayers is also reported to have given a major boost to the June 2023 collection.
“Domestic VAT registered Sh24.4 billion in June with a 100.4 per cent performance rate which translated to a growth of 21.7 per cent when compared to June 2022,” Ms Simiyu says.
On the whole, KRA collected Sh2.17 trillion in tax revenue for the period ended June 2023, missing its target for the financial year by Sh107.0 billion. The authority cited the prevailing tough economic environment as the reason for missing its target in 2022/23, with traditional outperformers such as Customs Taxes falling below target. Of the Sh107 billion missed by KRA in its target for 2022/23, Sh34.6 billion is attributable to Customs.
