The Kenya Revenue Authority has missed on its first quarter revenue target by 28 billion shillings according to the Kenya Revenue Authority Commissioner General, John Njiraini. Mr Njiraini told Kenya’s Parliamentary session last Thursday that Kenya Revenue Authority managed to collect approximately 300 billion shillings in the first three months of the current financial year against the target of 328 billion shillings.
Mr. Njiraini said that the shortfall of 28 billion shillings because of what he called ‘things that are not in our control’ saying that despite the less 28 billion shillings off the target, the collected figure still represents a 10.2 percent growth compared to a similar period at the same time the previous year and this shows how high this year’s target was placed.
According to Kenya Revenue Authority, the failure to hit the target is attributed to a reduction of the corporate taxes as a result of large companies posted lower earnings that were saddled by higher financing costs in the wake of steep rise in the interest rate as well as the stiff competition from the Chinese and Indian products.
KRA also gets much of its revenue from payroll taxes from company employees but due to these hard economic times, large companies decided to lay off their staff as the government also imposed a recruitment freeze. This resulted in the shortage of staff that KRA would have collected payroll taxes from.
The taxman managed to collect 65 billion shillings from Pay As You Earn (PAYE) and this was 10 billion off target and this is the area that was hardest hit by this slowdown. According to KRA, payroll taxes grew by 9.5 percent last year compared to an average 20.7 percent the previous three years and this is an indication of the deteriorating employment market and according to Mr. Njiraini the slowdown was caused by the freeze in the public sector wage increments as well as the weak growth in the large corporate sector payrolls, a growth of 3.4 percent.
The Kenya Revenue Authority also revealed that it has hired international consultants, Mckinsey, that will help the agency to seal loopholes in the tax administration it believes that are denying the agency billions of shillings every month and also businesses have also submitted lower corporate taxes, paid in installments, and this is as a result of flattening out or also as a result of a drop in the earnings.
Records from KRA shows that the taxman has been facing a growing tax disputes of worth 105 billion shillings as well as appeals that are valued at 75 billion shillings that are waiting to be heard by the tribunal, where the agency hopes to fill the 20 billion tax gab and that 30 billion shilling worth of fresh cases are still in court.