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President promises to increase tax collection by Sh500 bi*lion

Friday, January 6th, 2023 06:10 | By
President William Ruto. PHOTO/Courtesy

Kenyans will have to tighten their belts further following the announcement by President William Ruto that he targets to increase tax revenues by Sh500 billion by June this year.

The President, however, said most of the increases will come from VAT taxes that are never submitted adding that only 60 per cent of collectible VAT is paid to KRA.

“I have embarked on a trajectory to build our own revenue. Everybody is going to pay tax starting with William Ruto, there will be no waivers. We saw people waiving taxes for their businesses, you buy this bank and sell that bank, that is not going to happen under my watch,” the President said in an interview with television stations on Wednesday.

The President also said the government is installing a new system that will capture lost tax revenues.

“We are collecting only 60 per cent of collectible VAT, almost 40 per cent we are not collecting. The system we are now installing is going to drive collections to between 90 to 97 per cent,” he said.

Budget deficit

The President said they intend to digitise all government services in the next six months in a move to help curb pilferages.

“Every government service where tax is payable will be done online. That way I can be able to broaden the tax base. The target I have is by June this year, we should be able to collect an extra Sh500 billion,” said the President.

Kenya collects Sh2.1 trillion and spends Sh1.6 trillion to pay debt. The budget deficit is 6 per cent and Ruto said he plans to bring the deficit to 5 per cent.

The KRA surpassed its revenue target again, collecting Sh2.03 trillion in the 2021/22 financial year.

It was the first time in history that KRA passed the Sh2 trillion mark as the taxman’s aggressive collection strategies paid off.

“The positive revenue growth mirrors the improved tax compliance from taxpayers who contributed to the collection of revenue surplus of Sh148.9 billion against target, which is the highest surplus ever in KRA’s history,” KRA’s Commissioner-General Githii Mburu said yesterday in a statement.

Tax target

KRA had a tax collection target of Sh1.882 trillion in the last financial year as captured in the 2022 Budget Policy Statement.

The taxman was also able to surpass its new higher target of Sh1.976 trillion as the National Treasury twice raised the bar for the tax agency, seeing a possibility of collecting more owing to improved economic performance after the country rolled back the containment measures against the Covid-19 pandemic.

Strong revenue performance helped the fiscal deficit narrow to 6.2 per cent of GDP in FY22, down from 8.2 per cent in FY21. The improvement came from a combination of strong revenue performance after several years of declining revenue and a fall in capital expenditure.

The Ruto government has ended the subsidy on petrol and is working on a supplementary budget that cuts an additional 0.7 per cent of GDP in expenditure.

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