Kenya Revenue Authority has announced 102.6% increase in its January revenue collection surpassing its target by KES 3.53 billion.
Despite the challenging economic environment, KRA collected Ksh. 142 billion against a target of Ksh. 138 billion representing 6.7% growth over the same period last year.
“With a positive forecast on the economic growth which is projected to bounce back at 6.4% in 2021 from the projected growth of 0.6% in 2020, KRA remains positive on the response of revenue to the economic resurgence.” KRA Commissioner General Githii Mburu said.
This was the second month running that KRA posted an improved and above target performance since the outbreak of Covid-19. The positive performance is widely accredited to the resurgence of the economy.
According to the Quarterly GDP Report by Kenya National Bureau of Statistics, the economy contracted by 1.1% in the third quarter of 2020 compared to a contraction of 5.5% in the second quarter of 2020.
In addition, the relaxation of the stringent Covid-19 containment measures, the implementation of the Post Covid-19 Economic Recovery strategy 2020-2022 by the government and the sustained implementation of enhanced compliance efforts by KRA in the month of January 2021 have continued to drive this performance.
The performance is also partially attributed to the reversal of the government fiscal measures that had been initiated to cushion individuals and business entities against the effects of the Covid-19 pandemic.
These included the reversal of; VAT rate from 14% to 16%; PAYE top marginal rate from 25% to 30%; Corporation Tax rate to 30% from 25%, among other policy initiatives. The revision of these tax rates meant an increase in the revenue that KRA collects.
In January, the Customs & Border Control (C&BC) Department collected Kshs 54.919 billion reflecting a growth of 9.7% and registering a revenue surplus of Kshs 6.053 billion.
The customs revenue was achieved through a sustained daily average of non- oil revenue at Kshs 1,727 billion compared to Kshs 1.744 billion in December 2020, which was the highest ever daily average collection for customs revenue. Exemptions and remissions in Customs declined by 4.8%, positively impacting the revenue base by Ksh 283 million.
The Domestic Taxes also registered improved performance at 97.1%, the best progress since the start of the Covid-19 pandemic. The Domestic Taxes recorded an improved growth of 5.0% in January 2021 from a decline of 10.4% in December 2020.
During the month under review, Excise Domestic Taxes recorded a growth of 42.8% after collecting a surplus of Kshs 3.422 billion while Withholding Tax surpassed the target by Kshs 396 million reflecting a growth of 8.2%. Pay As You Earn (PAYE) taxes recorded a performance at 98.6%.
The PAYE performance has continued to be affected by policy measures instituted in April 2020 i.e. reduction in PAYE top rate from 30% to 25% and 100% remission for persons earning below Kshs 24,000 per month.
However, this is bound to change in the coming month as the re-adjustments to the PAYE bands rates have been reversed effective 1st January 2021.
Corporation Taxes recorded a revenue collection growth of 44.4 %. This is equivalent to a performance rate of 119.4% against the target, an improvement from December 2020 performance rate which stood at 93.5%.
The Value Added Tax (VAT) domestic remittances grew by 8.5%. This was an improvement from a decline of 19.8% achieved in December 2020. The performance is expected to further improve as businesses continue to convert purchases to sales.
Purchases grew by 27% in December compared to the sales during the same period. The huge growth of purchase reflects positivity in the market and optimistic economic recovery prospects.
Besides escalating its fight against tax evasion and leverage on technology to support tax collection, Mburu said the authority will continue to push for compliance enforcement efforts by driving the implementation of the new tax measures including digital service tax, minimum alternative tax, and voluntary disclosure programme.