While releasing the third quarter revenue performance, KRA Commissioner General John Njiraini said taking into account the operating environment over the last year that adversely impacted revenue collection, the authority has had to consult Treasury on revision of the revenue estimates.
“Several policy and administrative measures taken in the current year have negatively impacted revenue including interventions to address the cost of living through reduction of duties and taxes on petroleum and food products,” he revealed.
In last year’s Budget Statement, the government moved to remove excise tax on kerosene and continue the implementation of Common External Tariff on rice to allow importation at 35 percent among other measures.
The KRA made a similar plea to Treasury to review revenue targets for the 2010/2011 fiscal year alluding to the tax cuts made on essential goods.
To ensure that such targets were met, the government proposed a raft of measures including plans to remove tax incentives in the 2011/2012 budget and widen collection to incorporate more small businesses to increase revenues.
Another factor affecting collection was the delay in enacting the proposed Value Added Tax (VAT) Bill that is expected to significantly scale down exemptions and zero rating.
“On zero rating, it’s important to point out that no long term solution to the VAT refund problem will be found unless a clear change in policy direction is taken,” Njiraini pointed out.
The discontinuation of withholding VAT in July last year, resulting in excess collection, saw claims increase to the current Sh24 billion, which Njiraini said the country is unable to finance, hence the need for the public and business community to support policy changes.
The revenue authority announced an increase in revenue collected for the third quarter to Sh160 billion by Sh14.4 billion, representing a 13.5 percent increase during the same period from in 2010/2011.
Domestic Taxes posted a 17 percent growth to Sh100.2 million for the quarter this fiscal year from Sh85.7 million in the same period last year.
Petroleum tax declined by 2.5 percent in the last nine months of 2011/2012 compared to the previous year.
“Excise Duty on oil which accounted for a 46.1 percent was the key driver registering a decline of 15.2 percent. The decline is partly attributable to the removal of excise duty on kerosene and diesel,” Njiraini said.
Quarter 4 projections are anticipated to stand at Sh213.4 billion with cumulative collection so far from July 2011 to March 2012 standing at Sh498.62 billion representing a 12 percent growth within the same period last year.