Tax Collections Drops by Sh57bn On Corona Reliefs, Depressed Sales

Kenya’s Tax collections dropped by Sh57.43 billion in the five months of 2020 to May compared with a same period in 2019 due to low sales by businesses, reduced earnings by workers and tax reliefs.

According to recent data published by Treasury Secretary, Ukur Yatani, tax receipts for January-May 2020 amounted to Sh550.64 billion, a decline of 9.44 percent compared with Sh608.07 billion in the corresponding period a year ago.

The drop in collections by the Kenya Revenue Authority (KRA) has been attributed to reduced earnings by businesses struggling with lower sales since January, while workers have been hit hard by stagnant pay in an environment where companies have been shedding jobs to contain costs.

The coronavirus pandemic containment measures by the Ministry of Health, worsened the situation from March resulting in the closure of some businesses and reduced operating hours for others.

Tax reliefs were also applied by the Treasury from April to cushion businesses and workers from the economic shocks of the pandemic further thinning collections by KRA.

Statistics from KRA show collections in May amounted to Sh89.87 billion, a drop of 30 percent, or Sh38.52 billion, compared with Sh128.29 billion in the same month a year ago.

The May receipts were the lowest since the Treasury started making public the monthly revenue and expenditure data which reflects the impact of the full implementation of the tax reliefs amid lower earnings for businesses and families.

Kenya’s private sector activity contracted between January and May, according to Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) — a survey that tracks monthly business performance, largely in services and manufacturing sectors.

“Business conditions have contracted for five consecutive months now. In fact, the employment sub-index fell by the sharpest level in May since data collection began (February 2014). Consequently, the reduction in the workforce has reduced overall input prices for private sector firms,” Jibran Qureishi, former Stanbic Bank’s regional economist for global markets and now the bank’s chief research economist for Africa said in the PMI statement early June.