The Kenya Revenue Authority (KRA) tax revenue for the two months to August fell 15 percent to Sh1
The latest data from the National Treasury show that tax revenue fell by Sh33.27 billion in the two months, compared to Sh221.35 billion in the same period last year.
The decline reflects a subdued environment with below average imports due to low demand for goods despite the gradual reopening of the economy in July.
Corporations struggling with reduced revenues have continued to cut jobs, cut salaries and send workers on unpaid vacation, adding further strain to KRA’s collections of sales and payroll.
Finance Minister Ukur Yatani responded to the decline by lowering sales targets for the year through next June due to the ongoing impact of the pandemic and tax breaks to protect Kenyans from the adverse effects of the disease.
“The sales forecasts for the 2020/21 financial year have been revised taking into account the development of sales up to the end of August 2020 and the ongoing effects of the Covid-19 pandemic on economic activities as well as the measures to contain its spread,” said Yatani in the draft budget review and outlook paper.
The Treasury cut its forecast tax collection for this fiscal year by Sh91.2 billion to Sh1.42 trillion, compared to earlier estimates of Sh1.51 trillion in June.
Mr. Yatani linked the overhauls to bars closing and mass gatherings bans amid uncertainty about when the facilities will reopen. Alcohol and cigarettes, most of which are sold in bars and restaurants, account for more than 75 percent of tax revenue.
Alcohol and cigarettes are among at least 31 products, the prices of which will rise from October 1, when the tax officer reviews the excise tax to bring it in line with the year’s inflation rate.
The Treasury Department had hoped bars could resume operations by September, when Kenya is expected to keep the coronavirus under tight control.
Firms continued to lay off workers despite an increase in economic activity in the private sector, as recorded in a monthly survey by Stanbic Bank Kenya.