17 June 2012

Kenya: KRA to Raise Sh215 Billion From Salaries in 2012

THE government plans to raise over Sh215.99 billion from your personal income to finance its Sh1.45 trillion expenditures over the next one year. The revenue from Pay As You Earn(PAYE) is targeted to be 22 per cent higher than the Sh176.92 billion it raised in the last financial year.

As the Minister of Finance read the 2012/2013 budget, many questions abound as to how the country would be able to raise the money without any major announcements on the existing tax brackets or new jobs.

According to the treasury estimates, it plans to generate 27 per cent more in revenues, from Sh686.7 billion collected by KRA in the last year to Sh870 billion in the next year. Out of this, Sh817.45 billion will constitute the total tax income while Sh51.36 will be non tax income. As it pushes for a change in the tax exempt goods as per the proposed VAT bill, the government plans to raise 30 per cent more from Value Added Tax. VAT taxes will in effect raise to ShSh231.85 billion up from Sh177.83 billion last year.

Income tax from corporations will contribute Sh187.64 billion while income tax from the Local Authority Trust Fund will contribute Sh20.1 billion. The total taxes on international trade and transactions will make Sh98.78 billion. Other sources of income include incomes from government property, bringing in Sh16.88 billion and administrative charges like immigration and identity cards expected to generate over Sh10 billion.

Analysts at audit firm PWC however say the ordinary KRA revenue of Sh870 billion can be challenged as it is expected to fall short of the target by 25 billion in Financial year 2011/12. "It is not clear how this ambitious target can be met as the minister did not propose any far reaching tax measures," PWC said in budget commentary.

Domestic borrowing is expected to finance the budget to the tune of Sh277.8 billion which may stretch the debt limit further while the government has got a a total committed external grants of Sh56.2 billion from development partners. However, Daniel Kamande, an economic analyst at Ernst and Young is not confident in the funding from external sources. "External financing, especially from countries likely to be affected by the Euro issues may be hard, they may opt to resolve their issues first," he said.

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