How government hopes to increase revenue for the f...

How government hopes to increase revenue for the financial year 2016/17

As the National Treasury Cabinet Secretary Henry Rotich expects to make his annual budget statement on Wednesday, 8th June 2016, revenue projections from the budget estimates indicate that the government intends to make revenue gains from ongoing Kenya Revenue Authority (KRA) reforms to realize the revenue targets.

KRA has been at pains to satisfy government’s appetite for more revenues to boost its burgeoning expenditures, since the jubilee administration came to power.

In the 2016/17 budget, the government targets revenue collection including Appropriation-in-Aid (AiA) of sh1,499.4 billion (20.3 percent of GDP) from sh1,294.3 billion (19.7 percent of GDP) in the previous financial year.

Ordinary revenues is projected at sh1,375.2 billion (18.6 percent of GDP), up from the estimated sh1,183.3 billion (18.0 percent of GDP) in the previous financial year.

Budget estimates note that much progress has been achieved towards broadening the tax base and improving revenue administration. In addition, the Government has simplified and modernized the VAT legislation and consolidated all the appeals in the tax legislation into one legislation. Similarly, a modern and simplified Excise Duty and Tax Procedure legislation have been enacted, while a review of the Income Tax Act has commenced.

The Kenya Revenue Authority instituted measures to seal revenue leakages in customs administration (PVoc requirements) and border areas for all imports. Other measures include: expansion of withholding VAT agents for suppliers to County Governments; targeting nil and non-filers; Rental Income Programme and operationalisation of the Tax Appeals Tribunal.

To further measure these efforts and see what else could be done, the budget estimates for 2016/17 financial year note that

a reputable consulting firm has been engaged to deep-dive into KRA business processes and systems to propose realistic adjustments intended to reverse the revenue shortfalls currently obtaining.

McKinsey & Company were hired to help enhance its revenue collection after failing to meet revenue collection targets for the second year in a row.

The taxman has also established a special department to monitor how its employees engage with taxpayers and curb tax leakage. The department will handle integrity issues arising from within and outside the agency. The department will be headed by the Deputy Commissioner for Ethics and Intelligence, who will report to the Commissioner-General, John Njiraini.

It will be remembered that President Uhuru Kenyatta ordered a life style audit of all KRA staff to establish their sources of income and lifestyle, considering the efforts being made to increase revenues which seem to have been unsuccessful in the two previous years.

In the the nine months to March 2016,  collected Sh842.5 billion which amounted to 11.7 per cent growth over the same period from the last fiscal year. But the taxes were below the nine-month target of Sh911.6 billion by a significant Sh69 billion.

KRA Commissioner-General John Njiraini said that performance by the corporate sector had led to low income taxes while lower imports caused related duties to under perform by a significant margin.

Government will be banking on recommendations of McKinsey & Company, the various measures it has instituted in the last one year and the Ethics and Intelligence department to increase its revenues and further boost jubilee’s appetite for more expenditure. This gains may however be made in the next 2-3 years and not immediately.


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