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Traffic offenders gifted KRA Sh31.5b in 2018

Martin Mwita @PeopleDailyKE

Fines from traffic offences increased to Sh31.56 billion in the financial year 2017-18, as roads proved to be a considerable revenue source for the tax man.

As Kenyans break for the Christmas and New Year celebrations, government entities led by the traffic police department are expected to arrest more traffic offenders, in a move that could boost the Kenya Revenue Authority tax base.

Coming in the wake of continued missed targets by Times Tower which fell short by Sh76.8 billion in its first quarter target for 2018-19 financial year, the increase in the number of police checks is telling.

National Treasury data, estimates that the national government cumulative revenue collection, including Appropriations in Aid, amounted to Sh369.6 billion (equivalent to 3.7 per cent of GDP).

Tax targets

This is against a target of Sh446.4 billion (equivalent to 4.6 per cent of GDP)- the taxman’s set target for the quarter in the current financial year, where he is tasked to collect an ambitious Sh1.97 trillion.

“It is below target by Sh76.8 billion mainly due to shortfalls in other Income Tax, VAT, Imports and Excise Duty among other tax heads,” National Treasury says in its November quarterly economic and budgetary review.

Last year, KRA saw the traffic revenues increase by Ksh7.4 billion, from Sh28.9 billion in a corresponding period in 2016-17 financial year.

The revenue target for the financial year ending June 30, 2019 is an upward revision from the Sh1.6 trillion KRA had been given in the previous financial year ended June 30, 2017.

The new target is, however, proving to be a challenge to the taxman who has previously missed its targets, despite tax reforms.

In the financial year 2017-18 cumulative revenue collection including A-i-A was Sh1.49 trillion, Sh172.4 billion below the revised target of Sh1.66 trillion.

To help seal the gap, the government has been pushing for tax reforms including the Finance Bill 2018, signed into law by the President on September 21, which introduced a myriad of taxes including the eight per cent VAT on petroleum products and levies in the financial services sector.

The Income Tax Bill, 2018 (ITB) is the most recent attempt by the government to align tax legislations with the Constitution and President Uhuru Kenyatta Big Four agenda.

Under the bill, the government aspires to broaden its tax base and reduce inconsistencies within the tax regime. The proposals have, however, been criticised with tax experts who met in Nairobi yesterday poking holes in the government plans.

Among measures criticised is the planned introduction of a 15 per cent presumptive tax effective January 2019, and Capital Gains Tax.

Presumptive levy

Presumptive tax will see persons acquiring or renewing business permits or licences at the county part with 15 per cent of their single business permit fee as tax.

“This would limit investment in rural development by SMEs, youths, women and persons living with disabilities. It restricts their ability to then venture out in business and business-led acitivities,” said James Muraguri, CEO Institute of Public Finance.

The think-tank has since called for reconsideration of the 15 per cent presumptive tax rate to align it with the Ugandan rate set at between 1.5 and three per cent, saying it would set a harmonised trend within the East African Community.

Other taxes faulted include the 35 per cent tax on taxable income exceeding Sh500 million which according to IPF-Kenya, it will have minimal impact as those on this bracket are few.

The entity has also noted that the tax base has not fully been exploited by the ITB due to disconnect between technology taxation and sustainable revenue mobilisation.

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