Times Tower, the headquarters of the KRA, in Nairobi
By Business Daily Africa
Aggressive tax collection and recovery measures by the Kenya Revenue Authority (KRA) raised revenue collection by a fifth in the year to June 2022, the highest ever annual growth margin recorded by the agency.
The tax agency said on Thursday that it grew revenue by 21.7 percent or Sh148.9 billion to hit Sh2.03 trillion, eclipsing the previous high of 21 percent seen in the 2006/2007 fiscal year.
This is the first time the country’s revenue has hit the Sh2 trillion mark, having tripled over the past 11 years, easing pressure on the Treasury in its efforts to close the budget funding gap, which stood at Sh1.03 trillion in the year ended June 2022.
The rise in revenue was backed by a recovery of the economy in 2021, which expanded by 7.5 percent compared to the Covid-19 pandemic-led contraction of 0.3 percent in 2020. This boosted corporate, payroll and Value Added Tax performance.
The KRA has also recently enhanced collection efforts by among other things deploying more than 500 intelligence officers to gather information on tax evaders and utilising data to track non-payment of taxes on income by businesses.
“The extensive use of data and intelligence to unearth unpaid taxes have led to improved voluntary compliance and tax base expansion which is aimed at onboarding taxpayers previously not paying their fair share of taxes,” said the KRA on Thursday.
“For example, the KRA is permitted by law to utilise various databases to pursue suspected tax cheats, among them bank statements, import records, motor vehicle registration details, Kenya Power records, water bills among other data.”
Car registration details have been used to smoke out individuals who are driving high-end vehicles but have little to show in terms of taxes remitted, while the power meter registrations have helped the taxman to identify tax-dodging landlords, some of whom have been slapped with huge tax demands.
KRA Commissioner General Githii Mburu told the Business Daily in an interview that since 2019, the agency has profiled 4,028 tax cases through the intelligence-gathering programme that have the potential of yielding up to Sh540 billion in revenue. Out of this, the KRA has managed to recover Sh32 billion in tax dues.
The agency has also rolled out a voluntary tax disclosure programme which commenced in January 2021, and which realised Sh8.55 billion in taxes from 17,038 applications in the 2021/2022 fiscal year.
In addition to the tougher tax collection actions, the agency also moved to tighten scrutiny on its staff suspected of abetting tax evasion through lifestyle audits and vetting for misconduct.
In 2019, KRA interdicted tens of workers for abetting tax evasion after being under covert watch for four months involving trailing their money and communication, commonly referred to as wiretapping.
These measures, the agency said, helped the revenue performance, especially in the VAT and excise segments, which are most prone to evasion due to reliance on traders as collection agents.
In the year ending June 2022, VAT collections contributed the highest share of revenue to the taxman at Sh520.4 billion, representing a growth of 27 percent year-on-year, helped by enhanced compliance efforts by KRA and the recovery of the economy which boosted purchasing power.
Corporation tax collection rose by 32.7 percent to Sh242 billion against a target Sh218.2 billion, driven by increased remittance from finance and insurance, manufacturing, trade and transport sectors.
Pay as You Earn (PAYE) or payroll taxes returned Sh461.8 billion against a target of Sh455.1 billion on the back of the gradual recovery of the job market, while excise duty collections were up by 16 percent to Sh256.3 billion.
Overall, tax and other revenue collections on behalf of the national government (exchequer collections) went up by 23 percent to Sh1.899 trillion, while revenue collected on behalf of other government agencies rose by 5.1 percent to Sh131.5 billion.
These agency collections include the road maintenance levy, airport revenue, aviation revenue, and petroleum development fund, while the KRA is also the collecting agent for the Nairobi County government.