Missed revenue targets offer sobering lessons

Kenya’s missed revenue targets despite higher taxes offer sobering lessons for policy makers.

It’s not surprising to any Kenyan that their buying power has significantly been eroded in the past few years. The cost of almost everything has gone up and it is weighing heavily on many pockets.

The irony of all this is that as Kenyans’ buying power is diminishing, taxes levied by the Kenya Kwanza administration are increasing.

In the past few months, Kenyans have had to contend with the housing levy, higher income tax for those earning above Sh500,000, fuel levy, turnover tax, higher excise duty on mobile money transactions among others.

The picture is also particularly worrying when you consider that the Kenya Revenue Authority (KRA) missed its revenue target for the first quarter of the current financial year by Sh79 billion.

Despite doubling the value added tax on fuel, revenue collection targets on oil plunged by 8.6 percent to Sh71.7 billion in the first quarter to September from Sh78.5 billion at the same time last year.

This is down to slow economic growth, low oil imports tax exemptions on food-related items and failure by some government entities to remit Pay As You Earn (PAYE).

For this reason, policymakers must reconsider plans to add any more taxes. The focus should now be how to keep the economy afloat with a sliding shilling, which has meant costlier purchases for importers and merchant traders while the external debt load has grown.