Treasury collections decline to Sh96b in July amid optimism
MONEY: National Treasury collected Sh95.9 billion in July, a 12 per cent dip compared to same time last year, due to Covid-19 shocks.
An analysis of the Treasury’s revenue statement by Genghis Capital shows that ordinary revenue collection included Sh94.5 billion in tax revenue and Sh1.4 billion in non-tax revenue.
“Traditionally, the review month has been a slow month in ordinary revenue mobilization and as such, untangling the Covid-19 impact on the actual out turn would be a daunting affair.
That said, the ordinary revenue collection trailed the average Sh111.2 b hit in the second quarter period (April – June),” said Churchill Ogutu, the head of research at Genghis.
Francis Kamau, a tax partner at Ernst & Young described the performance as impressive saying he had anticipated a worse performance due to the prevailing economic conditions.
“I was expecting over 25 per cent dip considering that corporation tax was reduced from 30 to 25 per cent and VAT reduced from 16 to 14 per cent.
Many companies have laid off workers affecting PAYE collections. Transactions world over have reduced by about 37 per cent,” he said.
Kamau said Kenya performed better than its East African compatriots, Uganda and Rwanda, whose initial reports indicate they registered a much bigger dip in revenue collection.
According to Kamau the dip could deepen further to about 25 per cent by December before the collections begin to rise again between January and June next year.
Ordinary revenue collection target for Financial Year 2020/21 was revised to Sh1.633trillion up from the Sh1.621 trillion contained in the budget presentation.
In the revised ordinary revenue collection targets, tax revenue stands at Sh1.568 trillion while non-tax revenue target is Sh66.1 billion.
The protracted debate on revenue allocation to counties, which is currently ongoing, saw absorption of funds lag in July with net recurrent issues at Sh36.8 billion while net development issues stood at Sh1.5 billion.
Ogutu, however, refuted Treasury’s claims that it borrowed no money domestically in the month of July saying he was aware it had borrowed Sh137.1 billion during the period.