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| Times Tower, Kenya Revenue Authority headquarters in Nairobi. FILE PHOTO | NMG |
Tax collections in five months to November grew at a slower pace compared to similar period in 2016, indicating the revenues are yet to fully recover from a bruising presidential election in 2017.
Latest Treasury data published in the Kenya Gazette indicates tax receipts rose by 9.2 per cent to Sh555.6 billion in the five months to November 2018.
This is slower compared to a growth of 13.9 per cent to Sh473.8 billion registered in the July-November period of 2016.
“The Uhuru-Raila handshake in March breathed some life into the economy and the recent imposition of eight percent VAT on petroleum products contributed to the 9.2 percent growth,” said Paul Gachanja, chairman, department of economics at Kenyatta University.
Political uncertainty in the months before and after the August 2017 general elections hit small-scale business hard, slowing down economic growth.
Treasury data shows tax income grew by 7.3 percent between July and November 2017 following the political upheavals.
The March 9 truce between President Uhuru Kenyatta and opposition chief Raila Odinga — popularly known as the ‘handshake’ — restored investor confidence at a time economic activities had stalled.
“Most tax revenue is generated from small and medium scale businesses, meaning that a good political environment has a direct bearing on the economy through better tax collection,” said Dr Gachanja.
In September, the government imposed eight percent value added tax on petroleum products, highlighting tax collection prospects for the Kenya Revenue Authority (KRA).
Prior to this, petroleum products had been exempted from VAT but since introduction of the tax, the prices of diesel, petrol and kerosene shot up.
The taxman also tightened his noose on tax cheats by promising stiffer penalties for non-compliant businesses and individuals.
The KRA in October directed that oil marketers issue electronic tax register receipts to motorists fuelling at their stations following the signing of the Finance Bill.
KRA chief manager for domestic taxes Judith Njagi said the KRA officials would use undercover purchase agents to determine non-compliant dealers.