Tax collection rises as economy recovers

Evidence of real economic recovery from the Covid-19 pandemic has started to manifest itself, with the Kenya Revenue Authority (KRA) for the first time surpassing its revenue collection target in December.

Some of KRA's departments have recorded the highest collections ever, making the authority believe that the country is finally shedding the pandemic off the economy.

Since the onset of Covid-19 in March last year, KRA has been experiencing revenue shortfalls, resulting in missing collection targets by Sh186.3 billion between March and November 2020.

This was largely due to the slow economy caused by the pandemic, and the consequent containment measures that saw thousands of businesses closed, workers sent home and generally the economy hit a stand still.

But in its report for the December 2020 revenue performance, KRA has posted results with prospects of a recovering economy, with the performance improving at the rate of 101.3 per cent.

“This was the first positive and above target collection rate since the outbreak of Covid-19 pandemic,” KRA commissioner-general Githii Mburu said in a statement shared Friday.

He attributed the improvement in revenue collection directly to the relaxation measures, after four months of stringent Covid-19 containment actions between March and July 2020.

Containment measures

According to the authority’s revenue performance since easing of containment measures, it has taken the country more than four months to start realising real impacts of economic recovery.

Between March and November, KRA had earlier announced that it missed revenue collection targets by Sh186.3 billion. The authority collected Sh1.09 trillion taxes, against the Sh1.28 trillion target.

The authority also had to forego Sh65 billion in taxes due to tax relief measures introduced by the government.

But in a bounce back to near normal economic operations, KRA has announced it collected Sh166 billion in December, against its set target of Sh164 billion. The collection represented 3.5 per cent growth in comparison to revenue performance in December 2019.

“For the month under review, the Customs and Border Control (C&BC) Department recorded the highest ever monthly revenue collection in KRA’s history of Sh60.777 billion reflecting a growth of 40.9 per cent and registering a revenue surplus of Sh12.2 billion,” KRA stated.

This meant that even though by close of November customs revenue were at a deficit of Sh8.4 billion, the year ended with a surplus of Sh3.78 billion at the department.

The improved performance at the CBC department means resumption of cross-border business. The Domestic Taxes Department registered a 91.1 per cent collection rate, the highest since the beginning of the pandemic.

“During the month under review, pay as you earn (PAYE) taxes recorded the best performance at 99.8 per cent while withholding tax surpassed the target by Sh725 million, reflecting positive economic recovery prospects,” Mr Mburu said in the statement.

The authority also reported the month recorded the highest ever daily average collection for customs revenue during the month, at an average daily dry revenue of Sh1.7 million.

The introduction of new taxes such as minimum tax for companies with turnovers of at least Sh50 million and the digital services tax are avenues KRA also expects to utilise to widen its tax base this year.