KRA sees higher tax collection as worst of Covid-19 impact fades

The Kenya Revenue Authority (KRA) believes that the worst of Covid-19 pandemic impact on tax collection is over and expects a gradual recovery in the coming months.

The taxman says the last four months of the 2019/2020 financial year ended June were particularly hard as the government enforced strict measures to contain the spread of infectious virus.

Tax collections had dipped by 20.9 percent to Sh352 billion in the March to June period when compared to the collections in similar period last year.

However, KRA said in a webinar on Tuesday that collections are beginning to rise especially after the relaxation of curfew hours and resumption of flights, offering some relief to businesses.

“April to June period was difficult as we co-existed with the pandemic. We believe the worst is now behind us,” said Paul Matuku, the KRA commissioner for legal and board coordination.

Mr Matuku said the flights resumption, recovering cargo business as well as the reopening of general businesses in the economy is boosting tax revenues.

KRA data showed August collections to end of last week were 13.4 percent down when compared to collections in a similar full month last year.

Deputy commissioner for research, knowledge management and corporate planning at KRA, Alex Mwangi said the August figure is promising given that June collections were 17 percent down when compared to a similar month in 2019.

“The improvement is likely to continue as the economy reopens,” said Mr Mwangi.

However, KRA collections are expected to face pressure from extended disruptions in economic activities such as closure of bars and schools as well as the job cuts.

These measures look set to depress excise duty, corporation tax and pay-as-you-earn (PAYE) collections.

Tax waivers such as cut of value added tax (VAT) from 16 percent to 14 percent and exemption of Sh24,000 and below monthly salary from PAYE will also depress collections.

KRA bright sentiments come on the back of record Sh1.607 trillion collections in the 2019/2020 financial year compared to Sh1.58 trillion in the preceding financial year.

The collections translate to a performance rate of 97.9 percent, boosted by a four percent growth in domestic tax collections to Sh1.092 trillion.

However, customs taxes fell 2.8 percent to Sh510.63 billion majorly on the back of reduced import activities as business activities reduced and airport operations retreated.