Taxman beats target to collect Sh635 billion

Kenya Revenue Authority (KRA) defied a drop in mobile phone and cigarette tax income, a weak shilling and high inflation to surpass its revenue target for the fiscal year 2010/11 by 18.8 per cent.

The taxman collected Sh634.9 billion for the 12 months to June 30, 2011 compared to Sh534.4 billion the previous year.
It was also Sh4.2 billion above KRA’s revised target of Sh630.7 billion. KRA had an initial target of Sh641.2 billion, but following what KRA commissioner general Michael Waweru termed “significant tax changes” affecting the tobacco and oil sectors coupled with a worsening operating environment, the exchequer targets were revised.

“Good enforcement mechanisms we put in place and improved economic prospects helped us perform well,” said Mr Waweru while releasing the results yesterday. The collections from domestic taxes improved by 20.9 per cent from Sh338.2 billion to Sh408.8 billion - the highest of the departments.

The customs services revenue grew by 15.3 per cent to net Sh223.5 billion while Sh2.6 billion was realised from road transport.

Mr Waweru said exchequer revenues registered stronger growth than agency revenues. This, he said, is largely attributed to under performance of the oil sector, with the road maintenance levy fund, which dominates agency revenues being adversely affected by high world prices as well as structural constraints in the sector.

Although the taxman recorded improved collections compared to the previous year, a number of tax heads were affected by tax policy changes and the changed economic environment.

“Disputes between large oil marketers, the Ministry of Energy, Kenya Petroleum Refineries Ltd and regulators complicated the performance in the sector,” said Mr Waweru, “Reduction of taxes on petroleum products which were occasioned by need to cushion Kenyans against rising prices also impacted negatively on revenue collection from petroleum sector.”

Ongoing price wars in the mobile telephony market that was triggered in August last year by Airtel Kenya before sucking in all the other three operators - Safaricom, Telkom Kenya and Essar Telecom Kenya’s yu - led to reduced revenues for the taxman since mobile users are spending less on airtime. An amendment to the Finance Act that removed excise duty based on description of cigarettes also lowered taxes collected on the product by Sh2 billion during the fiscal year.

In the 2011/12 fiscal year, KRA is required to collect Sh733.4 billion, of which 696.9 billion is exchequer revenue and the balance Sh36.5 billion from various agency revenues.