Kenya Revenue Authority counters World Bank claims of missed tax targets
NAIROBI - Kenya Revenue Authority has defended missing revenue targets over the past decade as reported by the Word Bank in its 16th edition of the Kenya Economic Update.
In a statement to the press, the authority’s commissioner for strategy, innovation and risk management Mohamed Omar, said Kenya’s revenue growth over the past decade compares well with prevailing economic indicators including Gross Domestic Product - GDP growth.
This is contrary to a World Bank Kenya report which recorded that revenue collections in the country have underperformed targets by an annual average of about 3.7 per cent points of the GDP.
According to the authority, financial year 2016/2017 saw Kenya’s tax to GDP ratio stand at 17.1 per cent contrary to the report that placed the ratio to 16.9 per cent and described it as the lowest in a decade.
KRA claimed that the 17.1 per cent is among the highest tax to GDP ratio in non-oil economies within Africa, and the highest within the EAC region where the average stands at 14.8 per cent.
However, it lags behind several middle-income country peers including South Africa -27.3 per cent, Botswana-25.6 per cent, Jamaica-26.8 per cent, Mozambique -23.1 percent, Senegal-19.8 per cent, and Vietnam-19.1 percent.
Their annual revenue performance released in July reported a 13.8 per cent growth for the financial year ending 2016/2017, up from Sh1.21 trillion collected in the financial year 2015/2016.
Omar attributed the growth to increased tax and policy reforms implemented by the taxman aimed at digitising revenue collection systems to mitigate revenue leakages.
While this is the case, the World Bank pointed out that Kenya’s revenue is not growing as fast as its economy, and that the weakness in revenue performance has exacerbated fiscal pressures.
It reported that the fiscal deficits have widened from 3.5 per cent in financial year 2016/207 to 8.9 per cent of GDP in the same period.
With that, debt levels have steadily climbed to 57.2 per cent of GDP in 2017, from 37 per cent reported in 2010.
Also, and due to missing the revenue targets, the government has been forced to borrow externally to invest in infrastructure in a bid to improve the competitiveness of the economy.
This has led to an increase in expenditure at the pace of 26.5 per cent between financial year 2010/2011 and 2015/2016, an increase of 3.9 per cent to GDP.
While the revenue collections remain low, the authority has rolled out a number of projects which include an enhanced cargo scanning, Integrated Customs Management System –iCMS, The Regional Electronic Cargo Tracking System- RECTS, and a Data Driven Compliance portal that aim at closing all loopholes to revenue leakages.