The Kenya Revenue Authority (KRA) has failed to meet tax collection targets for the 2011/2012 financial year, owing to tough economic conditions and pro-poor tax interventions.

Kenya Revenue Authority HQ

KRA collected Sh707.3 billion against a revised target of Sh719 billion for the financial year ended June. The original target for the year was Sh733.4 billion. The collection, however, represented a 13 per cent growth over the Sh635 billion realised during the 2010/2011 financial year.

KRA Commissioner-General John Njiraini (Pictured) said a volatile economic environment and tax measures taken by Government to cushion the poor against rising cost of living last year impacted heavily on tax collection.

“Key economic parameters did not behave as forecast and  provide a stable platform for revenue mobilisation,” he said.

During the year under review, economic growth plummeted from 5.7 per cent the previous year to 4.1 per cent, inflation skyrocketed to a high of 18.9 per cent in December, the exchange rate fluctuate throughout the year while oil prices also took an upward trend before starting to ease. These factors, coupled by the decision by the Government to resort to tax measures like removal of excise tax on kerosene, continuing stay on the implementation of the common external tariff on rice to allow importation at 35 per cent as opposed to 75 per cent, impacted heavily on tax collections.

Others were remission of duty on imported wheat from 10 to zero per cent, and remission of duty on imported maize to cushion the poor.  Njiraini said petroleum levies and indirect domestic taxes recorded the poorest performance.

Petroleum taxes recorded a decline of 4.1 per cent to Sh66.2 billion from Sh69 billion the previous year while indirect domestic taxes recorded a decline of 3.7 per cent to Sh130.8 billion compared to Sh135.7 billion in 2010/2011.

Njiraini said the authority is implementing technology-based measures to tap more people into the tax bracket and ensure compliance among existing taxpayers.

During the year, KRA says it netted about 200,000 new taxpayers.

Among the measures being implemented is connecting all electronic tax registers (ETR) machines to a central server to enable the authority monitor usage electronically instead of doing so manually.

“We are having problems in monitoring usage of ETR machines and we want to connect them to a central server to enable use monitor usage,” he said.

He added KRA is also ready to provide  support for the devolved system of government by helping them collect revenue.

By NJIRAINI MUCHIRA, The Standard