Corporate taxes exceed target by Sh22.69 billion
BY CONSTANT MUNDA
- KRA raised nearly $ 330.71 billion in corporate income taxes during the reporting period, beating its fiscal year target by $ 22.69 billion, an analysis of recent Treasury Department revenue shows.
- Finance Minister Ukur Yatani reintroduced the maximum income tax rate of 30 percent for resident companies on January 1st.
Tax revenue from corporate profits exceeded Treasury Department’s revised targets in June by 7.37 percent, driven by the economic recovery in the second half and inflows from discontinued tax breaks related to Covid-19.
The Kenya Revenue Authority (KRA) raised nearly Sh.330.71 billion during the reporting period. in corporation tax and thus exceeded the target for the financial year by Sh 22.69 billion, as an analysis of the latest revenue reports from the Ministry of Finance shows.
The budget review report indicates that tax remitted by companies in January-June 2021 rose 19.59 percent year-on-year to Shs 174.09 billion. a turnaround from the first half to December 2020, when revenues rose 3.42 percent to Sh156.62 billion when the reduced corporate tax was still in effect.
Finance Minister Ukur Yatani reintroduced the maximum income tax rate of 30 percent for resident companies on January 1, following the approval of the legislature, and ended eight-month relief when the top tax rate had been reduced to 25 percent.
KRA Commissioner General Githii Mburu said in July that corporate tax growth was “driven by increased remittances from the energy, agriculture and construction sectors, which rose 222.7 percent, 33.1 percent and 31.9 percent, respectively
Percent or “.
Despite the withdrawal of the income tax cuts in the Tax Act (Amending Act), the Treasury Department kept lower investment deductions and the removal of some discounts that came into effect to partially cover the tax gap created when the act came into effect in April 2020.
Mr. Yatani had estimated in the April disclosures to the International Monetary Fund (IMF) that the abolition of a number of corporate tax breaks would raise approximately 28.15 billion shutters annually.
Measures such as cutting the investment deductions for companies that construct buildings for production facilities and hotels to 100 percent from 150 percent in the calculation of corporate tax should help the KRA to generate an additional 14.74 billion SH in 12 months.
Additional income tax revenue was expected from the abolition of the tax exemption on interest on contributions to the Deposit Protection Fund (Sh5.20 billion) and the removal of a short-lived discount of 30 percent of electricity costs for manufacturers (Sh2 .7 billion).
Some of the value-added tax (VAT) exemptions removed by the Tax Laws (Amendment) Act included supplies for the construction of a power plant, which is estimated to cost an estimated $ 29.34 billion in equipment more Sh16.567 billion net.
Mr. Yatani argued that the removal of some corporate tax rebates – as well as the removal of some VAT exemptions that have an impact on sales as the additional costs are passed on to consumers – are part of Kenya’s strategy of “broadening and increasing the tax base.” the efficiency of the tax system ”.
The Treasury Department and KRA argue that tax spending, which they believe rose from $ 478 billion a year earlier to $ 535.9 billion in 2018, has not benefited the economy through more jobs and affordable prices for consumers are.
“The government has the impression that the private sector is making this huge profit and not paying taxes, but the cow was milked to the end,” said Mucai Kunyiha, chairman of the Kenyan Manufacturers Association, in an earlier interview.
“We have to move away from the situation where people were looking at us like we were walking away with a lot. We haven’t moved away with much. We are not in a healthy state. “
Treasury data shows that corporate and corporate revenue tax revenue for the year ended June 2021 was 7.47 percent higher than the 307.74 billion shredders collected the previous year. The Treasury Department initially set a target for corporate and corporate taxes to be $ 334.30 billion.
before being revised first to Sh335.99 billion and finally to Sh308.02 billion.
The downward revision came after the Kitengela Bar Owners Association successfully petitioned the courts to suspend minimum tax enforcement pending a decision on a case filed by business lobbies.
Enforcement of the law would have resulted in companies having to pay tax authorities at least a percentage of their annual income.