Half-year tax collections rose by 14.5 per cent in the six months to December 2019, the fastest pace in five years, pointing to a gradual rebound in business performance on the back of fresh taxation measures.
The data Treasury Secretary Ukur Yatani released on Friday shows tax receipts climbed to Ksh779.32 billion in the July-December 2019 period from Ksh681.04 billion in the same period a year earlier.
The Ksh98.29 billion (14.51 per cent) jump came in the wake of the unrelenting war on tax cheats by the Kenya Revenue Authority (KRA).
The agency has from July rolled out what it calls a prosecution-led investigation strategy, buoyed by intelligence on operations of tax evasion rackets.
“We have a lot of information about what people are doing out there, and that’s why we are focusing on what we are calling prosecution-led enforcement because we have the evidence already,” KRA Deputy Commissioner for Enforcement and Investigations Edward Karanja said.
The collections in the first half of the current year ending in June represent 45.71 per cent of Ksh1.7 trillion revised full-year target set by the Treasury.
Taxes form the bulk of government’s revenue, which Mr Yatani has said rose 15.9 per cent year-on-year in the six months through December, without giving the actual collections. Mr Yatani, however, said ordinary revenue — comprising taxes and non-tax streams such as levies, rent of buildings, fines and forfeitures — missed target by Sh138.7 billion, largely on depressed collections from payroll (job) taxes.
“This growth was driven in part by a rebound effect, after the poor performance in the previous financial year as well as the effect of the tax policy measures introduced in the Finance Act 2019,” the government’s finance chief says in the draft 2020 Budget Policy Statement, which forms the basis for the Budget for the year starting July 2020.
Increased tax collections may also have benefited from full compliance with tax measures introduced in the Finance Act 2018, but which were bogged by lack of clarity in early days of implementation.
Some of the unclear measures, which prompted clarifications in Finance Act 2019 include a tax on dividends from untaxed profits or sale gains, withholding tax on demurrage charges and insurance premiums paid to foreigners as well as a tax on betting winnings, which were delayed by a court case.
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