Ever wondered where the government gets the funds for roads, schools, and all those other things? Well, a sizeable chunk of it comes from taxes! Let’s take a friendly peek into the Kenya Revenue Authority’s (KRA) performance over three interesting fiscal years.
Fiscal Year 2019/2020: The Pre-Pandemic Picture and Initial Impacts
This year gives us a glimpse into the economy before the full force of the COVID-19 pandemic hit. While the pandemic’s effects started to be felt towards the end of this period, the initial part of the year was relatively “normal.”
| Tax Category | Collection (KES Trillion) | Key Observations |
| Total Revenue | 1.607 | Showed a modest growth of 1.7% compared to the previous year. |
| Exchequer Revenue | 1.510 | Performance was slightly below the target at 98.6%. |
| Domestic Taxes | 1.092 | Grew by 4.0%, indicating some underlying economic activity. |
| Customs Taxes | 0.511 | Saw a slight decline of 2.8%, potentially hinting at early disruptions in international trade. |
| Agency Fees | 0.097 | Revenue collected on behalf of other government bodies. |
What the Numbers Tell Us:
Even before the major disruptions, revenue growth wasn’t spectacular. Domestic taxes showed some resilience, but the dip in customs taxes might have been an early indicator of global economic headwinds. The initial whispers of the pandemic were starting to be heard.
Fiscal Year 2020/2021: Navigating the COVID-19 Storm
This was the thick of it – lockdowns, business disruptions, and a global economic slowdown. How did Kenya’s tax collections fare?
| Tax Category | Collection (KES Trillion) | Key Observations |
| Total Revenue | 1.669 | Surprisingly, it showed a 3.9% growth despite the economic turmoil! This suggests some resilience and perhaps effective tax administration measures. |
| Exchequer Revenue | 1.544 | For the first time in eight years, revenue collection exceeded the target (100.9%). |
| Domestic Taxes | 1.039 | Experienced a slight decline (performance rate of 99.8%). PAYE and Domestic VAT were particularly hit, reflecting job losses and reduced consumption because of the pandemic. |
| Customs Taxes | 0.625 | Performed strongly, growing by 16.6% and surpassing the target (103.0%). This might be because of a rebound in specific import sectors or changes in import values. |
| Agency Fees | 0.125 | Continued to contribute steadily. |
What the Numbers Tell Us:
This year was a rollercoaster! While domestic taxes took a hit because of the obvious economic challenges, the surprising growth in overall revenue, driven by a strong performance in customs taxes, suggests that certain parts of the economy held up or even saw increased activity. It also speaks to the KRA’s efforts to maintain collection efficiency in a tough environment.
Fiscal Year 2021/2022: The Rebound and Record-Breaking Collections
As the world started to emerge from the acute phases of the pandemic, Kenya’s economy began to recover, and this was clearly reflected in the tax collections.
| Tax Category | Collection (KES Trillion) | Key Observations |
| Total Revenue | 2.031 | A record-breaking year! Revenue surged by a massive 21.7%, crossing the Two Trillion Shilling mark for the first time in KRA’s history. |
| Exchequer Revenue | 1.899 | Continued strong performance, exceeding the target by 3.3%. |
| Domestic Taxes | 1.297 | Showed significant recovery and growth (performance rate of 102.4%). PAYE and Corporate Tax saw substantial increases, indicating improved employment and business profitability. |
| Customs Taxes | 0.729 | Continued its strong trajectory with a 16.6% growth, reflecting increased international trade as the global economy recovered. |
| Agency Fees | 0.131 | Maintained a steady growth. |
| Key Domestic Taxes: | ||
| PAYE Taxes | 0.462 | Experienced a strong growth of 27.0%, signaling a recovery in the job market and increased income levels. |
| Corporation Taxes | 0.242 | Saw a significant jump of 32.7%, indicating improved corporate profitability as businesses bounced back. |
| Domestic VAT | ~0.272 (based on next year) | While the exact figure for this year isn’t explicitly stated in this summary, the growth of 11.3% suggests a substantial increase from the previous year, reflecting increased consumer spending. |
| Non-oil Taxes | 0.481 | Within domestic taxes, this category (excluding oil) grew by a healthy 20.7%. |
What the Numbers Tell Us:
This year was a testament to the resilience of the Kenyan economy and the effectiveness of tax collection efforts during the recovery phase. The substantial growth in almost all tax categories paints a picture of businesses getting back on their feet, more people being employed, and increased consumer activity.
Boosting the Taxman’s Arsenal: Recommendations for Increased Collections
So, the KRA has been doing a commendable job, especially navigating the pandemic years. But can things be even better? Here are a few ideas on how to potentially increase tax collections in Kenya:
1. Expand the Tax Base:
a. Formalise the Informal Sector: A significant portion of Kenya’s economy is informal. Implementing strategies to encourage and simplify the process of formalising businesses can bring more individuals and entities into the tax net. This could involve offering incentives, simplifying registration processes, and providing education on the benefits of formalisation.
b. Digital Economy Taxation: As the digital economy grows, ensuring fair taxation of digital services and transactions is crucial. Implementing and refining the Digital Service Tax (DST) effectively, while considering international best practices, can unlock a significant revenue stream.
2. Enhance Tax Compliance:
a. Leverage Technology: Investing further in technology, such as advanced data analytics and AI, can help identify tax evasion and improve compliance monitoring. Expanding the use of systems like eTIMS (Electronic Tax Invoice Management System) to cover more sectors can also enhance VAT collection.
b. Simplify Tax Filing and Payment: Making the tax filing and payment processes even more user-friendly and accessible through online platforms and mobile applications can encourage more timely compliance.
c. Strengthen Enforcement: While being fair, robust enforcement mechanisms are necessary to deter tax evasion. This includes targeted audits and the prosecution of serious offenders.
3. Improve Taxpayer Education and Engagement:
a. Public Awareness Campaigns: Conducting widespread public awareness campaigns to educate citizens and businesses about their tax obligations and the benefits of paying taxes can foster a culture of compliance.
b. Dedicated Support for SMEs: Small and Medium-sized Enterprises (SMEs) often face challenges in understanding and complying with tax regulations. Providing tailored support, training, and simplified tax regimes for SMEs can improve their compliance rates.
4. Address Tax Leakages and Corruption:
a. Strengthen Internal Controls: Robust internal controls within the KRA are essential to prevent corruption and ensure that collected taxes are properly accounted for.
b. Inter-Agency Collaboration: Enhanced collaboration between the KRA and other government agencies (e.g., customs, business registration) can help identify and address tax evasion schemes more effectively.
5. Review and Optimise Tax Policies:
a. Regular Policy Review: Periodically reviewing existing tax policies to ensure they are fair, efficient, and aligned with economic realities is important. This might involve adjusting tax rates, broadening tax bases, or simplifying complex regulations.
b. Incentivise Compliance: Exploring the use of incentives for early or consistent tax compliance could encourage better taxpaying behaviour.
Our Sources:
The information presented in this article is based on the data points and trends extracted from the KRA reports and summaries of their performance for the fiscal years 2019-2020, 2020-2021, and 2021-2022, as found within the provided search results. For a comprehensive and detailed analysis, the official KRA annual reports for these years are the primary sources – get them from the KRA website.
And there you have it! A look into Kenya’s tax collections over a fascinating three-year period, coupled with some food for thought on how to potentially boost those numbers even further. It’s a complex but vital part of keeping the nation running!
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