Third Eye

The harsh reality of Kenya Revenue Authority success story

Tuesday, July 6th, 2021 00:00 |
KRA headquarters. Photo/File

The taxman is celebrating having defied the global coronavirus pandemic that continues to harangue economies.

This follows Kenya Revenue Authority (KRA) having exceeded its annual target for the first time in eight years.

In total, KRA collected a record Sh1.669 trillion against an annual target of Sh1.652 trillion, surpassing the target by Sh16.808 billion. For this feat, the authority deserves a pat on the back.

This shows that a raft of revenue enhancement measures and new taxes propelled the authority to post record collections.

Through the initiative, KRA recruited more taxpayers using the newly implemented levies including digital services tax, minimum tax and voluntary tax disclosures.

However, the taxman should not sit pretty since some of the new taxes and levies, could turn out to be counter productive to the economy.

Analysts have warned that the enforcement of the new taxes will make bank loans, internet access and mobile phone calls costlier which will have a ripple effect on the economy.

For example, the proposed minimum tax on gross sales will stymie growth of small players, and is akin to taxing loss making businesses.

Coming on the back of the pandemic, this could threaten their survival leading to job cuts.

This would mean that collections from PAYE which had dropped 9.3 per cent, driven by reduction in employment emanating from measures taken by mainly private firms to reduce operating costs as a result of the Covid-19 pandemic, will suffer again.

Increasing excise duty on airtime and data from 15 per cent to 20 per cent to raise Sh8 billion from Safaricom, Airtel and Telkom Kenya will not only increase the cost of mobile telephony and internet services, but will slow down a sector considered the lifeline of the economy.

For Sh7 billion the taxman eyes from excise duty on loans, the move risks making credit costly for businesses as lenders transfer the burden to borrowers.

It will also make home ownership more expensive affecting the Housing pillar of the government’s Big Four Agenda.

Mobile lenders will also be hard hit with the cost of digital loans increasing by a larger margin compared to ordinary bank credit.

As for the increase in the cost of gas, the health and economic impact this will have on poor Kenyans who will be forced to use dirtier means of energy is a reminder that KRA’s sword cuts both ways.

Maybe soon, Parliament will find it appropriate to streamline the tax regime and correct some of the anomalies in the tax equation, for Wanjiku’s sake.

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