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

The Star (Kenya) - - News - BY RICHARD MUNGAI @Richiy­mungai

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.

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