Nairobi, 7th July, 2022…For the first time in Kenya’s history, the annual revenue collection has hit and surpassed the Two Trillion mark, defying the difficult economic environment brought about by Covid-19. This is after Kenya Revenue Authority (KRA) recorded a monumental revenue collection of KShs. 2.031 Trillion for the Financial Year 2021/2022 (July 2021 – June 2022) compared to KShs. 1.669 Trillion collected in the last financial year (FY 2020/2021).
The Authority registered an above–target stellar revenue performance after exceeding the fiscal year target as stated in the Budget Policy Statement. KRA surpassed the original target of KShs. 1.882 Trillion and two other upward revenue target revisions of KShs. 1.911 Trillion, which was later revised to KShs. 1.976 Trillion. This is the first time The Authority has surpassed its original target in 14 years (since FY 2007/08), after the previous target revisions were adjusted downwards.
The positive revenue growth rate mirrors the improved tax compliance from patriotic taxpayers who contributed to the collection of revenue surplus of KShs. 148.9 Billion against the original target, which is the highest surplus ever in KRA’s history. This also enabled The Authority to record another milestone after revenue collection just about tripled in the last 11 years from KShs. 707.36 Billion in FY2011/12 to KShs. 2.031 Trillion in FY2021/22. The performance represents a growth of 187.1 per cent in the last eleven years.
The revenue collection of KShs. 2.031 Trillion signifies a performance rate of 102.8 per cent against the revised target and a revenue growth of 21.7 per cent compared to the last financial year. This is the highest revenue growth in history of Kenya Revenue Authority.
The outstanding performance consistent with the prevailing economic indicators, especially the projected GDP growth of 5.9 per cent in FY 2021/22 (Budget Policy Statement 2022) compared to a growth of 2.9 per cent in FY 2020/21. The performance is further anchored on the ongoing transformation at the Authority including the implementation of a high performance culture with stringent performance accountability as well as strict enforcement of tax laws in the fight against tax evasion.
KRA is mandated to collect revenue on behalf of other government agencies mainly at the ports of entry. These include Road Maintenance Levy, Airport Revenue, Aviation Revenue, and Petroleum Development Fund amongst other levies. During the financial year ending June 30th 2022, KRA collected KShs. 131.479 Billion on behalf of the agencies reflecting a growth of 5.1 per cent compared to the last financial year.
The exchequer, which is the money collected on behalf of the National Government, grew by 23.0 per cent. This is after KRA collected KShs. 1.899 Trillion compared to KShs. 1.544 Trillion collected in the previous financial year. This translates to a performance rate of 103.3 per cent against the target.
Performance of Domestic Taxes and Customs
During the fiscal year, Domestic Taxes collected KShs. 1.297 Trillion against a target of KShs. 1.267 Trillion. This translates to a performance rate of 102.4 per cent with a surplus collection of KShs. 30.445 Billion.
Customs and Border Control sustained excellent performance with a collection of KShs. 728.530 Billion against the set target of KShs. 702.823 Billion, reflecting a revenue surplus of KShs. 25.707 Billion and a growth of 16.6 per cent. Non- petroleum taxes grew by 20.7 Percent while in petroleum taxes recorded a 9.4 percent growth. Non-oil taxes collections amounted to KShs. 480.540 Billion against a target of KShs. 446.516 Billion registering a surplus of KShs. 34.024 Billion while petroleum taxes amounted to KShs. 247.990 Billion reflecting a performance rate of 96.8 per cent.
Performance of Key Tax Heads
Corporation Tax: Corporation tax collection stood at KShs. 242.018 Billion against a target of KShs 218.161 Billion. This replicates a growth of 32.7 per cent over the last financial year. This performance was driven by increased remittance from key sectors like, Finance and Insurance, Manufacturing, Wholesale and Retail Trade, and Transport and Storage sectors.
Pay As You Earn (P.A.YE): P.A.Y.E registered a collection of KShs. 461.815 Billion against a target of KShs. 455.129 Billion. The performance was mainly driven by gradual recovery of the job market emanating from economic recovery.
Domestic VAT: The collections amounted to KShs. 244.693 Billion reflecting a growth of 24.0 per cent. The good performance is primarily attributable to enhanced compliance efforts by KRA and the economic recovery.
Domestic Excise: The tax head recorded a growth of 6.2% in FY 2021/22, with a collection of KShs 66.529 Billion. The performance turnaround is attributed to stringent enforcement against tax evasion focusing of curbing illicit trade and blatant non-compliance with tax laws by the players in the alcoholic and cigarettes sectors.
Key Revenue Drivers
The excellent revenue performance is attributed to implementation of key strategies as enshrined in KRA’s 8th Corporate Plan, tax policy measures and enhanced revenue administration.
Some of the strategies in the corporate plan include enhanced active surveillance and enforcement operations that have been reinforced by collaboration with the multi-agency team under the whole of Government approach in the fight against economic crimes.
To support the fight against economic crimes, KRA has also partnered with other jurisdictions globally to exchange tax information. Kenya’s Exchange of Information (EOI) steadily increased from 73 in 2020 to 173 in 2021. Kenya also recovered KShs. 10.5Million in 2020 and KShs. 985.2Million in 2021.
Tax policy measures have also contributed to positive tax growth during the 2021/2022 financial year. For example, Voluntary Tax Disclosure Program (VTDP) has immensely contributed to increased revenue collection. VDTP allows a taxpayer to disclose to the KRA tax liabilities that were previously undeclared and enjoy full or partial relief of penalties and interest on the tax disclosed. The program was introduced vide the Finance Act, 2020, commenced on 1st January 2021 and shall run up to 31stDecember 2023. Under the program, KShs. 8.546 Billion in taxes was collected from 17,038 applications in the fiscal year. A total of KShs. 9.562 Billion was applied for disclosure and waivers.
KRA has also continued to employ technological strategies to assist seal revenue loopholes. One of the strategies KRA has employed is the web-based system, iWhistle. The system allows the public to unanimously report corruption to KRA. This has enabled The Authority gather corruption and tax evasion related information from the public, while concealing the anonymity of the reporters. Through iWhistle, The Authority received a total of 850 corruption reports from taxpayers with a total tax estimate of Kshs. 6.26 Billion which grew from Kshs. 2.9 Billion in the FY 2020/2021.
The Authority is currently rolling out the Tax Invoice Management System (TIMS), which aims at plugging loopholes resulting from weaknesses in the ETR regime. The system will help in standardization and authentication of tax invoices at the time of generation by the trader and transmission to KRA on a real time or near real time basis. It will also enable officers, traders and the public to verify the validity of a tax invoice through the invoice QR Code or Tax Invoice Checker on the iTax portal.
KRA has progressively enhanced the iTax system for a better user experience. For instance, iTax has been enhanced to include an auto-populated return for taxpayers with employment income as the only source of income. As a result, over 5.6 million taxpayers filed their tax returns for the year 2021.
The investment in technology has further enhanced Customs operations and consequently improved revenue growth. For example, the Integrated Customs Management System (iCMS) has reduced the Customs cargo clearance and processing time, enhanced compliance and increased efficiency. The system has helped reduce time-taken to clear air cargo from an average of 6 days to 48 hours (2 days). This reflects a 66% improvement in clearance turnaround time, which has also reduced losses by traders and drastically reduced customer complaints. KRA has also invested in X-Ray baggage scanners, patrol boats, patrol vehicles, and field test kits among others. The equipment have enabled KRA to detect dangerous or contraband items concealed in luggage, parcels and cargo and reduced revenue leakage at the ports of entry.
The extensive use of data and intelligence to unearth unpaid taxes have led to improved voluntary compliance and tax base expansion which is aimed at on boarding taxpayers previously not paying their fair share of taxes. For example, the Authority is permitted by law to utilise various databases to pursue suspected tax cheats, among them bank statements, import records, motor vehicle registration details, Kenya Power records, water bills among other data.
Additionally, strengthening of integrity measures has contributed to the continued realization of set revenue collection objectives. This is evidenced by the fact that revenue collection can never thrive alongside interferences. These interferences may present themselves in the form of counterfeiting and fake licenses and or permits; forms of collusion, cartels and syndicates or any form of interference from external stakeholders. The ability to deliver excellent customer service, enforce revenue collection laws and collect the amount due for revenue is also undermined by any lapse in the integrity of the officers charged with this responsibility.
To ensure that staff uphold integrity, KRA continued to implement measures that promote a corruption free culture including creating awareness among staff on the Code of Conduct formulated to help them understand the standards of personal behaviour required as they perform their duties, lifestyle audits, vetting and background checks on new staff as well as strict disciplinary measures that deal with unethical conduct in a timely manner .
KRA’s 8th Corporate Plan targets to collect Kshs. 6.831 Trillion by the end of Financial Year 2023/2024. This being the first financial year of the corporate plan, KRA has surpassed it planned target of Kshs. 1.901 Trillion in the corporate plan and is confident of achieving the targets set in the three-year plan period and continue playing her role in the achievements of the aspirations of the Kenyan people.
On behalf of the KRA Board of Directors, senior management and Staff, I appreciate all compliant taxpayers for honouring their tax obligations and their contribution towards furthering Kenya’s economic sustainability through filing and paying their fair share of taxes.
Despite the challenges brought about by the COVID-19 pandemic, you still exhibited resilience and voluntarily paid your taxes to support the country achieve this great milestone. This will definitely go a long way in ensuring the sovereignty of this great nation.
KRA endeavours to make taxpaying experience better for all its customers; and reiterates its commitment to integrity and professionalism in serving taxpayers. “Pamoja Twaweza”
Tulipe Ushuru, Tujitegeme