Tax experts in Kenya have raised queries over Kenya Revenue Authority's stellar performance in a struggling economy, when it announced that it had overturned a more than Ksh31 billion ($289.71 million) revenue collection deficit in less than three months in a Covid-19 ravaged economy to post a surplus for the 2020/2021 fiscal year, breaking an eight-year revenue underperformance jinx.
But in a statement to The EastAfrican, the taxman said its collections were significantly boosted by enforcement measures on non-compliant taxpayers which generated a massive Ksh93.7 billion ($875.7 million) during the 2020/2021 fiscal year and the dispute resolution framework that netted Ksh31.43 billion ($293.73 million) in the same period.
Other revenue collections enhancement measures included the voluntary disclosure programme and amnesty for taxpayers that brought in Ksh997 million ($9.31 million) in taxes from 138 taxpayers as at June 30, 2021.
"KRA has also intensified its fight against tax evasion to ensure that no revenue is lost," the authority added.
The economy contracted to 0.6 percent last year and recorded underperformance of key tax heads including pay-as-you-earn (PAYE), import duty, value added tax (VAT), and other income taxes due to the Covid-19 containment measures.
According to the National Treasury total revenue collections for the nine months period to March 31, this year fell below target by Ksh31.6 billion ($295.32 million).
The taxman's collections including Appropriation-in-Aid (AIA) stood at Ksh1.24 trillion ($11.58 billion) against a target of Ksh1.27 trillion ($11.86 billion) largely due to the underperformance of PAYE, domestic VAT ministerial Appropriation-in-Aid (A-I-A), and other income taxes.
The situation was compounded between March and April 2021 the country had to once more contend with strict Covid-19 containment measures with five counties, including Nairobi, put into lockdown due to a surge in the third wave of the Coronavirus.
However, barely two weeks ago, the taxman said it has defied all odds to surpass its revenue target by four percent after eight years since the 2013/2014 fiscal year.
According to the taxman, the authority collected a record Ksh1.669 trillion ($15.59 billion) worth of tax revenues during the 2020/2021 fiscal year against a target of Ksh1.652 trillion ($15.43 billion), representing a surplus of Ksh16.8 billion ($157 million).
The collections more than doubled in the last 10 years from Ksh707 billion ($6.6 billion) in the 2011/2012 fiscal year.
"The impact of Covid-19 pandemic on the economy and the attendant containment measures slowed down economic growth in 2020. Economic growth in the first three quarters of 2020 contracted by an average of 0.4 percent compared with an average growth of 5.3 percent over the same period in 2019," the National Treasury's said in its Quarterly Economic and Budgetary Review dated May 2021.
According to the taxman, the Customs and Border Control department collected Ksh624.77 billion ($5.83 billion) surpassing its target of Ksh 606 billion ($5.66 billion) while petroleum taxes amounted to Ksh226.68 billion ($2.11 billion) surpassing its target by Ksh12.25 billion ($114.48 million).
Corporation tax grew by 3.7 percent driven by increased remittance from Energy, Agriculture and Construction while revenues from PAYE and Domestic VAT declined by 9.3 percent and 7.9 percent respectively. According to the taxman, domestic excise and withholding tax grew by 12 percent and 3.8 percent respectively.
"Of course we rely on what they say in terms of their numbers as we take them to be what they are but I think the main thing is that last year their target was not really increased because by the time the budget was being done of course Covid had picked up. It had been seen it was going to have a big impact," Fred Omondi, East Africa Tax and Legal leader at the Consultancy firm Deloitte East Africa told The EastAfrican.
"On the Customs side, I was a bit surprised but maybe somebody needs to look at the trade data because Customs exceeded target while there was a lot of disruption in the supply chain, so even if it recovered in the second half of the year it is quite interesting that KRA was still able to exceed targets. Someone has to look at the trade data to see what would have contributed to that; whether people imported some more products and in which category," he added.
However, according to KRA, the Customs revenues were helped by the growth of both oil and non-oil import values, with the only passenger-related revenues declining.
"Customs revenues was also driven by enforcement measures (cargo scanning, verification) that ensured accuracy in declarations, the authority said.