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Revenue Collection Down in First Quarter by Kes 42 Billion as Budget Deficit Widens

Revenue collection has dropped by Kes. 42 billion in the first quarter of the fiscal year 2020/21 as COVID-19 pandemic continues to hammer Kenyan economy.

Statistics from the National Treasury shows that the Kenya Revenue Authority collected Kes. 379 billion in the period between July and September this year from Kes. 421 billion collected during the same period last year.

Treasury attributes the weak revenue collection to underperformance in value-added tax, Pay-as-You-Earn, excise duty, and import duty.

Tax collected from PAYE during the three months to September 2020 dropped by 27% year on year Kes. 71.6 billion largely due to the 5% individual tax rate reduction introduced in March by President Uhuru Kenyatta to cushion Kenyans against the impact of COVID-19

The PAYE basket has also been affected by widespread job cuts with most companies shedding jobs to remain afloat.

Value-Added Taxes (VAT) on Domestic and Imported goods declined by 30.8% and 9.5% respectively in the period under review.

The revenue collection in the first three months of the fiscal year 2020/2021 fell below the government’s target of Kes. 429 billion.

However, revenue from external grants rose sharply to Kes. 3.9 billion, a 40% increase from Kes. 2.8 billion received in the same period last year as development partners ramped up funding to deal with coronavirus pandemic.

Budget deficit in the three months that ended in September grew to Kes. 131.7 billion compared to Kes. 123.5 billion during the same period in 2019, a 6.7% year-on-year increase.

Ministerial spending in the three months period amounted to Kes. 510.4 billion, of which Kes. 357.1 went to recurrent expenses such as debt repayment, wages, and pensions while 122 billion went to development expenditure.

Since March, the Kenya Revenue Authority has had to forgo Kes. 175 billion in taxes attributed to the stimulus program the government rolled out to cushion individuals and companies against adverse effects of COVID-19 pandemic.