Tax yield impressive in five years, ICPAK says
The National Treasury announced a Sh691.5 billion budget deficit in the Sh2.26 trillion budget for the financial year 2016-17
Kenya’s tax revenue growth outperformed the economy in the past five years and rose higher than the benchmark set by the World Bank, a report by the Institute of Certified Public Accountants of Kenya indicates.
The report indicates the country’s total revenue increased from Sh651 billion in 2010/2011 to Sh1.1 trillion in 2014/2015, representing a 44 per cent increase in revenue collection in five years.
On the other hand, gross domestic product growth fell from 6.1 per cent in 2011 to 5.5 per cent in 2015.
ICPAK said tax revenue to GDP ratio increased from 11.38 per cent in 2011 to 18.9 per cent in 2015, surpassing World Bank’s 18 per cent benchmark.
When compared with other economies in Sub-Saharan Africa, Kenya stands second after South Africa, which had an estimated tax to GDP ratio of 25.8 per cent in 2015.
The GDP ratio of the other countries in the region stands at between 11-15 per cent.
“The growth of tax revenue as a percentage of GDP has also been impressive. Tax revenue to GDP significantly increased from 20 per cent in 2010/2011 to 29 per cent in 2014/2015,” ICPAK said in the report titled Kenya’s Revenue Analysis 2011-2015.
According to Kenya Revenue Authority, over 40 per cent of the tax collection is generated from direct taxes. This portfolio comprises of income tax, vat, excise taxes, custom duties and taxes collected as appropriations in aid.
The push to generate tax revenues is driven by growing pressure on public budgets in a tough economic climate, and the need to reduce budget deficits.
The National Treasury announced a Sh691.5 billion budget deficit in the Sh2.26 trillion budget for the financial year 2016-17, driven by recurrent expenditure which accounts for about 80 per cent of the total spend. In July,Treasury secured a Sh60 billion loan from China to fund the budget deficit.