ANNUAL REVENUE PERFORMANCE FY 2016/2017

Transcription

1 Press Release ANNUAL REVENUE PERFORMANCE FY 2016/2017 J K Njiraini, MBS Commissioner General 20 TH JULY, 2017

2 Overall Performance Revenue collection in FY 2016/17 reached a new record with sh trillion being collected in comparison with sh trillion collected in FY 2015/16, a growth of 13.8%. In comparison with 2011/12 when sh billion was collected, revenue collection has doubled in a span of 5 years. FY 2016/17 growth represents an improvement over last year s performance of 12%, and compares well with the 5-year average growth trend of 14.3%. It also represents the highest growth over the previous 3- year period 2014/15 to 2016/17. FY 2016/17 performance compares well with prevailing economic indicators including GDP growth of 5.5% and average inflation rate of 8.1%, the latter which mainly affected food items exempt from taxation. The FY also recorded weak growth in cargo import traffic, a phenomenon witnessed across all the EAC economies, and which adversely impacted Customs revenue. Presently Kenya s Tax-to-GDP ratio stands at 19.3%, which is the 2 nd highest in non-oil economies within Africa, and the highest within the EAC where the average stands at 14.8%. Consumption/ Indirect Taxes VAT Consumption taxes exhibited strong performance with VAT growing at 21.2%. VAT has exhibited strong growth for the fourth consecutive year with annual growth averaging 21.5% between 2012/13 and 2017/17. The strong performance is attributed to enhanced compliance measures which among others include the expansion of withholding VAT framework which now covers in total 3,231 large taxpayers. Besides, key Page 2 of 7

3 sectors including construction and telecommunications showed robust growth in VAT performance, underlining continuing resilience of the Kenyan economy. Excise Taxes Domestic Excise Tax showed robust growth at 13.3% in FY2016/17 compared to annual average growth of 14.0% over the last four years. The main excise contributors (beer and tobacco) grew in tandem at 13.29% while spirits continued to perform strongly as has been witnessed since FY 2012/13. The major contribution to excise growth was enhanced compliance brought about by improved enforcement through the Excisable Goods Management System (EGMS), especially for the spirits sector where annual growth reached 22.7% in FY2016/17. Following the gazettment of fresh regulations to address past industry concerns, KRA plans to extend EGMS application to other sectors including bottled water, juices and carbonated drinks during 2017/18. Income / Direct Taxes Corporation/ Business Taxes Corporation Tax grew by 18.2% compared to annual average growth of 13.7% in the last four years, with FY 2016/17 showing the strongest performance over that period. Notably, key sectors met or exceeded expectations including the banking sector which recorded growth of 20.1%, even in the face of interest rate capping. This performance is attributed to among others, good profitability following cost management measures instituted by banks and stricter enforcement by KRA of bad debt provisioning rules. Other notable well performing sectors include construction (53.4% growth), ICT (46.6% growth) and transportation (90.9% growth). The weakest growth was recorded in manufacturing and electrical power generation, the latter being Page 3 of 7

4 attributed to large investment deduction claims by electricity generating companies. The strong performance of Corporation Taxes, potentially indicates that business prospects remain strong and that business confidence may be on the upswing following weak tax performance over the last two years. PAYE PAYE recorded growth of 7.9% compared to previous four-year average of 12.5%, with the depressed performance partly attributed to expanded tax relief granted in January 2017 through widening of tax bands. This measure alone cost the exchequer approximately sh. 2.5 billion in FY 2016/17. Other factors leading to weak PAYE performance include wage and employment freezes in the public sector and layoffs in key private sectors including the banking sector. The mix of strong Corporation Taxes and weak PAYE may be an indicator that corporates may increasingly be turning their preference towards technology to drive profitability, as opposed to previous labour intensive processes. Customs Customs recorded strong growth at 14.9% compared to a four-year average of 14.7%. Part of this growth is attributed to enhanced Road Maintenance Levy (RML) fee whose rate was revised upwards in June 2016 from sh. 12 to sh. 18 per litre. Even in the absence of enhanced RML, Customs growth in FY2016/17 was the highest for the past three years with the lowest growth of 8.0% having been recorded in FY2014/15. Improved performance by Customs is attributed largely to tighter enforcement measures through among others, (i) benchmarking of cargo values to address undervaluation, (ii) greater use of scanners, and, (iii) stricter application of cargo auction processes. Customs performance Page 4 of 7

5 however continued to be adversely impacted by sluggish import growth with container volumes in FY2016/17 growing by 6.4% in comparison with FY2015/16. The reduced import statistics are an East Africa wide phenomenon, with all EAC revenue authorities reporting sluggish Customs performance for 2016/17. In comparison with EAC counterparts, KRA performance for Customs was ranked the best for FY 2016/17 with the growth of 14.9% comparing favourably with 12.0% and 11.9% respectively for Tanzania and Uganda. Key Reform Agenda Apart from past reforms, the following key initiatives are presently under implementation: Integrated Customs Management System (icms) This new state-of-the-art product which is geared towards replacing the Simba System, is presently under roll out with its application already under way for Air Cargo. It is envisaged to have full roll out for Sea Cargo by July 31 st, The new solution comes with best practice features including cargo value benchmarking, auto-upload of cargo import data from shipping manifest to prevent import falsification, auto-exchange of information with itax to counter non-compliant traders and a virtual electronic auction platform to make Customs cargo auctions accessible to all. The new system is also planned to make Customs declaration processes more customer friendly, thereby paving the way for the era when traders will be enabled to make their own cargo self declarations. A media briefing on icms launch is planned for mid-august, Page 5 of 7

6 Integrated Scanner Management Solution This initiative aims to interconnect all cargo scanners to a Central Command & Control Centre, from where enforcement decisions will be coordinated. The solution combines capability to view and manipulate scanned images together with CCTV surveillance over sensitive work areas in order to maintain staff discipline. The key benefit provided by central coordination is the achievement of separation between field scanning operations and decisions regarding actions to be taken, with the latter happening off-site. The separation prevents physical contact between decision takers and cargo owners, besides providing access by a broader audience to scan images, thereby deterring misuse. The contract to implement the solution has been awarded and work is set to commence in August with completion timed for December Capital Gains Tax In order to address past compliance challenges, KRA commissioned changes earlier this year through which the payment of Capital Gains Tax (CGT) was twinned with payment for Stamp Duty. The twinning was achieved through a reconfiguration of itax, such that the system requires simultaneous settlement of both CGT and Stamp duty prior to property transfer. This innovation has driven dramatic reversal in CGT collections with the 2 nd half of FY 2016/17 recording growth of 29% in comparison with 1 st half collections. Conclusion Tax Performance for FY 2016/17 conveys optimism for fiscal stabilisation and potentially for future business prospects, given the robust performance in many tax areas. In comparison with past experience, tax performance for FY2016/17 has not recorded noticeable adverse impact Page 6 of 7

7 in the period leading up to the General Election. Indeed, unlike in past years when Customs import data slumped prior to election time, no noticeable impact has been discerned in the last quarter of FY 2016/17, when the slow down would have been expected. On behalf of the Board and Staff of KRA, I wish to extend our deepest gratitude to Kenyans, who have kept the Faith by continuing to heed the Call to Pay Their Taxes. We remain committed to making taxpaying experience better for everyone who seeks to interact with us through provision of a courteous and professional service. This we shall do through continuing investment in modern technology to support enhanced efficiency and the re-training of our staff towards customer consciousness. Besides, we remain deeply committed to the imperative to Facilitate our customers in line with our Core Values, which are to be Trustworthy, Ethical, Competent and Helpful (in short to be TECH). Tulipe Ushuru, Tujitegemee! J.K. Njiraini, MBS COMMISSIONER GENERAL Page 7 of 7