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Kenya Revenue Authority to collect KSh 1.7 trillion 2021/22

by biasharadigest

Kenya Revenue Authority(KRA) plans to collect KSh 1.7 Trillion in tax revenue during the 2021/22 financial year. This is compared to KSh 1.4 Trillion in 2020/2021 and represents an increase of 16%.

“This additional revenue will come from recently introduced taxes such as Digital Services Tax and minimum tax, reductions in exemptions and zero-rating, reductions in allowances and adjustment in excise duties.

On the administrative side, the increased revenue target means the Kenya Revenue Authority will be unrelenting in its compliance and enforcement efforts,” said Fred Omondi, Tax and Legal Leader, Deloitte East Africa.

He warns that unless the pace of economic growth accelerates much faster, taxpayers will likely continue to be bear a more significant burden as the budget grows to record levels each year.

There is an upward trend in the revenue collections Kenya Revenue Authority over the last five years from KSh 1.3 Trillion in 2017/18.

Income tax continues to be the leading revenue generator, with Kenya Revenue Authority projecting revenue of KSh 835 Billion in the financial year 2021/22, accounting for approximately 50% of the tax revenue.

However, from a tax revenue growth perspective, excise duty is projected to achieve the highest growth in revenues for Kenya Revenue Authority at 24%, followed by VAT at 20%, import duty at 15%, with income tax trailing at 14%.

According to analysts at Deloitte East Africa, the projected increase in tax revenues can be attributed to the expected economic recovery post-COVID-19, which is expected to spur economic growth and new tax measures such as digital tax, excise on additional products/services and minimum tax.

Kenya Revenue Authority to take tough measures on tax cheats

Further, the Kenya Revenue Authority is intensifying compliance and enforcement efforts.

Other ongoing measures include fast-tracking dispute resolution and the Voluntary Tax Disclosure Programme.

Moreover, the corporation tax rate reversion for resident companies from 25% to 30% and the Pay As You Earn (PAYE) top marginal rate from 25% to 30% may also boost revenue collection.

According to a 2021/22 Budget Brief by Deloitte East Africa titled Navigating New Realities, Kenya’s GDP is projected to grow by 6.3% and by 5.7% in 2021 and 2022 due to effective Post Covid-19 Economic Recovery Strategy, full re-opening of the economy, increased agricultural production due to favourable weather patterns and the resumption of international travel which will stimulate tourism.

Kenya’s fiscal deficit is expected to increase from 5.6% of GDP in 2020/2021 to 8.2% in 2021/2022, as 66% of revenues are expected to go into debt repayment.

Inflation is forecast to oscillate within the Central Bank of Kenya’s target range of 2.5% to 7.5%.These low inflation rates are expected to be supported by lower food prices and muted demand pressures.

Public debt has risen significantly from KSh 3.619 Trillion as of 30 June 2016 to KSh 7.340 Trillion as of 31 March 2021.

Deloitte points to Kenya’s reliance on debt financing options purposed at financing ongoing infrastructure development.

Kenya’s 2021/22 budget size is KSh 3.66 Trillion, made up of KSh 2.6 Trillion in recurrent expenditure and KSh 0.67 Trillion for Development, increasing 9% over the 2019/2020 budget.

Approximately KSh 1.2Trillion in recurrent expenditure is allocated to public debt-related expenses comprising domestic and foreign interest payments and debt redemptions. The increase in debt servicing expenses outpaced the allocations for development expenditure by over 200%, said the Deloitte East Africa Budget Brief.

This implies that borrowing for development expenditure financing might no longer be viable as the government may not service additional debt.

According to CBK figures- when adjusted for the 2021/22 fiscal deficit, total debt stock will amount to KSh 8.4trillion by June 2022, leaving only 7% before Kenya hits the KSh 9.0trillion debt ceiling.

“In our view, while recurrent expenditure helps in increasing the level of aggregate demand in the economy there is need for Kenya to tame the appetite of spending on recurrent expenditure both at national and county governments level in order to realize real growth,” said the Deloitte Budget brief.

ALSO READ: KRA Surpasses March 2021 Revenue Target by KSh 6 Billion

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