The Kenya Revenue Authority (KRA) missed its payroll and consumption tax collection targets for the three months to September, posting a shortfall of Ksh62.5 billion.
New data from the treasury indicated that the shortfall was driven by lay-offs and wage cuts undertaken by businesses in response to the Covid-19 pandemic.
The situation was exacerbated by tax relief measures introduced by the National Treasury in April in a bid to cushion firms and workers from the shocks of the pandemic.
KRA’s joint collection from pay-as-you-earn (PAYE) and consumption levies including Value Added Tax (VAT), import duty and excise duty stood at Sh225.14 billion in the quarter to September, against a collection target of Ksh288 billion.
PAYE, deducted from employee’s wages, missed the collection target by 21.11 per cent.
Excise and import duty missed the collection target by margins of 6.85 per cent and 12.06 per cent respectively.
Value Added Tax (VAT) collection was furthest off the mark, missing the target by 27.19 per cent.
“The decline is attributed to the difficult operating environment due to the Covid-19 pandemic which has been adversely affecting revenue performance from March 2020,” the treasury noted in its report.
Payroll taxes stood at Ksh71.56 billion in the three months to September, against a collection target of Ksh90.72 billion.
Many firms sent workers home at the onset of the pandemic in March, a situation that persisted in the months that followed.
Government restrictions on operating hours, curfew and movement have affected most firms’ revenues, causing them to undertake cost-cutting measures.
According to data from the Kenya National Bureau of Statistics (KEBS), more than 247,000 Kenyans lost their jobs in the first three months of 2020, a trend that continued with increased Covid-19 infection numbers in the months that followed.
There is, however, reason to be hopeful. Data from Stanbic Bank Kenya’s Purchasing Managers Index (PMI) suggests that, in October, firms started increasing new hires for the first time since February.
The data was explained by a slow resurgence of economic activity and the easing of various restrictions.