Corporate tax collections rise by 30 billion shillings as economy rebounds

0

July-December 2021 Corporate tax revenue (billions of shillings)

Corporation tax revenue for the six months to December 2021 rose by 30.04 billion shillings, marking the fastest pace of growth in more than six years.

That’s when businesses recovered from the disruptions of the coronavirus.

The latest quarterly data from the National Treasury shows that the Kenya Revenue Authority (KRA) received 186.67 billion shillings in quarterly corporate tax installments.

Receipts, which relate to collections between July and December last year, rose from the 156.62 billion shillings KRA received in the previous similar period at the height of the Covid-19 disruptions.

The 30.04 billion shillings growth translates to 19.2% growth in collections, one of the fastest six-month growths in more than six years.

Payroll taxes, collected as pay as you earn (PAYE), also recovered, rising by 43.9% or 67.03 billion shillings to 219.65 billion shillings.

The latest PAYE collections exceeded KRA’s target of 9.89 billion shillings, pulling revenue from job cuts and layoffs that caused a 25.65% decline, in the first contraction in addition to a decade.

The recovery of corporate tax and PAYE signals improving economic conditions, with businesses restoring full wages and rehiring workers as incomes recover.

While PAYE exceeded KRA targets, the increase in corporate collections was 10.92 billion shillings less than the 197.59 billion shillings the Inland Revenue had expected to receive during the reporting period.

Corporate income taxes had risen by 17 billion shillings to 162.16 billion shillings in the six months to December 2019 before the Covid-19 disruptions from March 2020, causing collections to fall by 5, 54 billion shillings.

Businesses were reeling from falling revenues in an environment of lockdowns and curfews leading to lower tax rebates.

The state’s decision to reduce corporate taxes from 30% to 25% for resident companies between May and December 2020 also contributed to lower collections by KRA in 2020.

The Treasury also shielded workers earning a monthly salary of up to 24,000 shillings from tax, thereby reducing KRA recoveries during this period.

The takeover of PAYE helped KRA exceed its revenue collection target of 42.47 billion shillings.

The Inland Revenue collected 1.032 trillion shillings against the 989.7 billion shillings that had been targeted in the half year ended December, sending collections above the 810.55 billion shillings collected in a similar period in 2020.

Excise duty collection exceeded the target by 8.98 billion shillings while Value Added Tax (VAT) on imports exceeded the target by 21.55 billion shillings.

KRA aims to raise 6.8 trillion shillings over the period of fiscal years 2021-22 to 2023-24, an average of 2.266 trillion shillings each year.

Last year, the tax office rolled out its eighth strategic plan, focused on increasing revenue mobilization through tax simplification, technology-driven compliance and broadening the tax base.

KRA defied layoffs, pay cuts and business closures in the Covid-19 environment to collect 1.669 trillion net shillings in the financial year ending June 2021, compared to 1.607 trillion shillings collected during of the previous period.

The latest collection means that annual revenue collection has more than doubled in a decade, considering the 707 billion shillings collected in the 2011-12 financial year.

Kenya is keen to collect more taxes to reduce the gaping budget deficit which saw total borrowing hit 8.2 trillion shillings at the end of December last year, an 86% increase from 4.406 trillion shillings five years ago.


Share.

Comments are closed.