In spite of the difficult operating economic environment brought about by COVID-19 pandemic, the revenue collection in FY 2019/20 (July 2019 - June 2020) reached a new record with Kshs. 1.607 Trillion collected, compared to Kshs. 1.580 Trillion collected in FY 2018/19. This represents a performance rate of 97.9% and revenue growth of 1.7% compared to last Financial Year. The performance is favourable and matches the prevailing economic indicators, especially the projected GDP growth of between 1.5% and 2.3% in 2020.
In addition, KRA collected other monies including Agency Fees amounting to Kshs. 97.114 Billion. This is revenue collected on behalf of other government agencies mainly at the ports of entry. They include Road Maintenance Levy, Airport Revenue, Aviation Revenue, and Petroleum Development Fund amongst other levies.
The exchequer revenue grew by 2.2% with a collection of Kshs. 1.510 Trillion compared to Kshs. 1.477 Trillion collected in FY 2018/19. This translates to a performance rate of 98.6% against target.
Customs and Domestic Taxes Performance
Revenue collection by Domestic Taxes Department (DTD) experienced a growth of 4.0% in FY 2019/20, down from an average growth of 13.9% recorded in the period July 2019 to February 2020. DTD collected Kshs. 1.092 Trillion in FY 2019/20 translating to a performance rate of 97.8% against target.
Customs and Border Control (C&BC) revenue collection amounted to Kshs. 510.63 billion translating to a performance rate of 98.4%. The revenue collection registered a reduction of 2.8% compared to the previous Financial Year.
Performance of Key Tax Heads
Corporation Tax: The tax head recorded a growth of 4.8% in FY 2019/20 which is a drop from an average growth of 8.2% recorded between July 2019 and February 2020. This performance was driven by increased remittance from Finance and Insurance and Manufacturing sectors which account for about ½ of total Corporation Tax collections. In ISO 9001:2015 CERTIFIED Page 3 of 4 particular, instalment remittance by firms within the Finance and Insurance sector grew by 7.6% in FY 2019/20, mainly due to growth of 6.4% in remittances by banks. Further, Corporation Tax remittance by firms within the Manufacturing sector also grew by 12.5% in the year.
PAYE: The PAYE Tax grew by 2.0% in FY 2019/20, a drop from an average growth of 11.0% recorded between July 2019 and February 2020. The slow growth was driven by decline in employment rate in the fourth quarter emanating from measures taken by mainly private firms to reduce operating costs. The tax head was also majorly affected by the reduction of the top PAYE rate from 30% to 25% and a 100% tax relief for persons earning below Ksh. 24, 000 per month.
Withholding Tax: The tax head recorded a growth of 18.2% in FY 2019/20, which is a drop from an average growth of 29.1% recorded between July 2019 and February 2020. This performance was boosted by increased Withholding Tax remittance from interest component which grew by 4.7%; remittance from dividends component grew by 13.6%; Management, Professional, Training Fees components recorded growth in remittance of 6.8%; while remittance from Contractual Fees grew by 15.9%.
Domestic Excise: the tax head recorded a decline of 6.4% in FY 2019/20, a dip from an average growth of 4.3% recorded between July 2019 and February 2020. This performance is mainly attributed to the effects of the COVID-19 pandemic, which contributed to the decline of production of excisable products like cigarettes, spirits, keg beer and non-keg beer.
Domestic VAT: Domestic VAT recorded a reduction of 7.0% in FY 2019/20, a dip from an average growth of 2.8% recorded between July 2019 and February 2020. The performance of the tax head was majorly impacted by the COVID-19 pandemic, which saw business turnovers decline. In addition, reduction of VAT rate from 16% to 14% also had an adverse effect on the tax head’s performance.
Trade Taxes: Non-oil revenue streams recorded a decline in remittance of 3.5% compared to the average growth of 3.4% experienced between July 2019 and February 2020. The performance is attributed to the slow growth in non-oil imports that had a value growth of 2.9%. In the period of July 2019 to February 2020, non-oil import value grew by 9.7%, while April - June 2020 recorded a sharp value decline of 13.9%. The tax head was also affected by drop in activities at airports (passenger arrivals) due to airport closures and the adjustment of VAT rate from 16% to 14% on all imports that are VATable.
Petroleum Taxes: Oil revenue recorded a decline of 1.4% in FY 2019/20, a dip from the average growth of 12.3% experienced between July 2019 and February 2020. This is attributed to the decline of overall oil import volumes by 4.9% in the year.
Therefore, the gentle growth in overall revenue collection is attributed to COVID-19 pandemic that had an adverse effect on the 4th Quarter performance as KRA had recorded a growth of 11.2% in the period before the pandemic (July 2019 to February 2020).
On behalf of the KRA Board of Directors and Staff, I commend the compliant taxpayers for honouring their obligation. Despite the unprecedented challenges brought about by the COVID-19 pandemic, you still paid taxes. Your great contribution to Kenya’s economic sustainability goes a long way in ensuring the sovereignty of this great nation. KRA reiterate its commitment to integrity and professionalism in serving taxpayers. The Authority is determined to make the taxpaying experience better for all its customers. KRA is optimistic that we will perform better in this new financial year.
Tulipe Ushuru, Tujitegemee!