Kenya Revenue Authority (KRA) recorded slow growth in collections of Pay as you Earn (PAYE) tax, attributed to a decline in employment rate in the fourth quarter between April and June 2020.
This is as private firms took measures to reduce operating costs by laying off workers as movement restrictions and curfews took a toll on their businesses.
PAYE collections were further hit by measures by the Government to reduce the income tax rate from 30% to 25% while offering a 100% tax relief for persons earning below KSh 24, 000 per month.
There was a 6.4% drop in Domestic Excise tax due to effects of the COVID-19 pandemic, which contributed to a decline in production of excisable products like cigarettes, spirits, keg beer and non-keg beer.
There was a 7% drop in domestic Value Added Tax (VAT) collections recorded between July 2019 and June 2020. The performance was majorly impacted by the COVID-19 pandemic, which saw business turnovers decline.
In addition, the reduction of VAT rate from 16% to 14% also had an adverse effect on the performance of VAT.
There was also a drop in import duties due to slow growth in non-oil imports. The tax was also affected by drop-in activities at airports (passenger arrivals) due to airport closures and the adjustment of VAT rate from 16% to 14% on all imports that are VATable.
KRA recorded a 1.4% drop in collection of petroleum taxes, compared to an average growth of 12.3% reported before the COVID-19 outbreak in March this year.
There was a decline in overall oil import volumes by 4.9% in the year. The Tax authority experienced a gentle growth in collection of this tax due to disruptions occasioned by the COVID-19 pandemic, which had an adverse effect on its Q4 performance.
But while the global virus continues to disrupt individual and corporate incomes, KRA has defied the pandemic to increase its overall tax revenue collection to KSh 1.607 Trillion.
This is within the period between July 2019 and June 2020, compared to KSh 1.580 Trillion collected in the 2018/19 financial year, a growth of 1.7% and a performance rate of 97.9% against target.
In addition, KRA collected other monies including Agency Fees amounting to KSh 97 Billion, which includes Road Maintenance Levy, Airport Revenue, Aviation Revenue, Port fees and Petroleum Development Fund amongst other levies.
Money held in the consolidated account from taxation and other government revenues grew by 2.2% with a collection of KSh 1.510 Trillion compared to KSh 1.477 Trillion collected in FY 2018/19.
This translates to a performance rate of 98.6% against target.
The Domestic Tax department collected KSh 1.092 Trillion in the 2019/20 financial year, translating to a performance rate of 97.8% against target.
Customs and Border Control revenue collection amounted to KSh 510.63 billion translating to a performance rate of 98.4%.
The revenue collection registered a reduction of 2.8% compared to the previous Financial Year.
KRA recorded a 4.8% growth in corporate tax in 2019/20 financial year, which is a drop from an average growth of 8.2% recorded between July 2019 and February 2020, the period before the virus outbreak in Kenya.
This performance was driven by increased remittance from finance and Insurance and manufacturing sectors which account for about half of total Corporate Tax collections.
In particular, instalment remittance by firms within the Finance and Insurance sector grew by 7.6% in the 2019/20 financial year, mainly due to growth of 6.4% in remittances by banks.
Further, corporation tax remittance by firms within the manufacturing sector also grew by 12.5% in the year.
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