KRA ’s missed tax target could affect employment in Kenya

The Kenya Revenue Authority (KRA) missed its half year tax collection targets by Sh47.6 billion. This will affect the economy since the budget will be ‘little’.

The treasury provided that revenue collection made of a Sh26 billion deficit in Pay-As-You-Earn (PAYE) revenue and a Sh15.9 billion shortfall in Value Added Tax (VAT) collection from imports.

From a newly released data; in December 2015 the total cumulative revenue, including Appropriations-In-Aid (AIA), amounted to Sh575.2 billion against a target of Sh642.9 billion, implying a total decline of Sh67.7 billion.

The massive fall of payroll taxes was influenced by the steep rise in interest rates and stiff competition from Chinese and Indian products. Employers were forced to lay off staff due to the high financial costs.

The corporate sector is now under a crisis and investors have to prepare for an impending drop in earnings. According to Business Daily, 8 companies have issued profit warnings since last year, signaling a drought in bonus payments and, in some cases, retrenchments.

The companies include Liberty Kenya Holdings, Britam, Express Kenya, Standard Group, Sameer Africa, Atlas Development, BOC Gases, TPS Eastern Africa, Crown Paints, Standard Chartered, Uchumi Supermarkets, ARM Cement, Mumias Sugar, Car & General and East African Cables.

Another reason for the missed collection target, KRA provided that there was a delay in the Excise Duty Act 2015 rollout with which was supposed to raise an additional Sh25 billion to help fund the Sh2.1 trillion budget.

The tax law came into force in December last year and some products had their prices pushed up. For example Beer prices went up Sh30 per litre, kerosene (Sh5.75 a litre), bottled water (Sh7 a litre), juice (Sh10 a litre) while a charge of Sh10,000 was imposed on imported motorcycles.

In addition, a Sh200,000 charge was imposed on all imported vehicles that are more than three years old and a Sh150,000 for newer ones. The Treasury said it had lowered its revenue projections for the financial year in the wake of weak performance in the first-half and adverse macro-economic factors.

“The revised projections take into account the impact of the delay in enactment of the Excise Duty Act 2015 that came into effect on December 1, 2015,” the Treasury said.

“The downward revision in ordinary revenues is on account of projected shortfalls in Income tax (Sh37.5 billion), largely on account of PAYE and VAT (Sh14.1 billion),” the Treasury added.

Erick Vateta564 Posts

--- Erick Vateta is a lawyer by training, poet, script and creative writer by talent, a model, and tech enthusiast. He covers International tech trends, data security and cyber attacks.


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