ISO 9001:2008 CERTIFIED
For immediate release
July 15th, 2014
FOURTH QUARTER AND JULY - JUNE REVENUE REPORT 2013/14
1.
Introduction
The following is the revenue performance report for the Kenya Revenue Authority
(KRA) covering the fourth quarter (April to June 2014) of the 2013/14 Fiscal Year.
The Fiscal Year 2013/14 marks the second year of the KRA Fifth Corporate Plan
period 2012/13 to 2014/15 whose strategic theme is;
“Achieving excellence in revenue administration through organizational renewal, innovation
and staff capacity enhancement for better customer focus”.
From the revised printed estimates of revenue, in the last Financial Year 2013/14, KRA
was expected to collect Kshs 963.7 billion, of which Kshs. 901.1 billion (93.5%) is
Exchequer Revenue and the balance of Kshs 62.6 billion (6.5%) represents the
various Agency Revenues that KRA collects. The Agency Revenue included Kshs
20.1 billion of the newly introduced Railway Development Levy. The target of Kshs
963.7 billion represented a growth of 20.4% over revenue collection in FY 2012/13
(i.e. Kshs 800.5 billion).
2.
Economic Environment for 2013/14
The revenue target for 2013/14 was predicated on fairly ambitious macro-economic
framework outlined in the Budget Policy Statement 2013 (BPS). However, the
macroeconomic environment varied from projections:
i.)
The economy was to grow by 5.5 percent but the data released by the Kenya
National Bureau of Statistics shows an average growth of 4.4 percent over the
first 3 quarters of 2013/14,
ii.) Inflation was forecast at 6.7 percent; this was exceeded with inflation averaging
7.0 percent,
iii.) Exchange rate to the US Dollar was projected at Kshs. 87.9; however the
average for the year was Kshs. 86.7 to the US Dollar,
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iv.) The value of dry imports was forecast to grow by 14.6% in dollar terms but only
grew by 5.1 percent over the fiscal year.
impact of this economic out turn on revenue performance was a negative
impact estimated at Kshs. 10.4 billion.
The
3.
Revenue Performance in the 4th Quarter (April-June 2014)
During the fourth quarter 2013/14, the key elements of the economic operating
environment were:
i.)
Inflation: the month on month inflation rate accelerated from 6.41% in April 2014
to 7.39% in June 2014,
ii.) Interest rates: the Treasury bill interest rate rose from an average of 8.76% in April
2014 to 10.25% in June 2014,
iii.) Exchange rate: the Kenya Shilling exchange rate against the US Dollar
averaged at Kshs 86.72 in April 2014 before depreciating to Kshs 87.61 in June
2014,
iv.) NSE index: the index closed at 4,949 points as at the end of April 2014 compared
to 4,885 points in June 2014 (decline of 1.3%).
Revenue performance for the fourth quarter of FY 2013/14 is as shown in Table 2(a)
and Table 2(b) below. Table 2(a) gives the overall performance while Table 2(b)
focuses on the Exchequer revenue performance only.
Table 2(a): Fourth Quarter Overall Revenue Performance (April to June 2014)
(Values in Kshs billion)
Department
Customs
Services
Actual 4th
Qtr.
2013/14
Target 4th
Qtr.
2013/14
Perf.
Actual 4th
Qtr.
2012/13
Growth
over 4th Qtr.
2012/13 (%)
Percentage of
Revenue
Contribution
87.1
82.8
105.2%
65.1
+ 33.8%
30.6%
134.9
135.8
99.3%
124.0
+ 8.8%
47.4%
Medium
and
Small Taxpayers
61.6
59.6
103.4%
50.2
+ 22.8%
21.6%
Total Domestic
Taxes
196.5
195.4
100.6%
174.2
+ 12.8%
69.0%
Road Transport
1.030
1.030
99.9%
0.816
+ 26.2%
0.4%
Total
284.6
279.2
101.9%
240.1
+ 18.5%
100.0%
Large
Taxpayers
Office
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Table 2(b): Fourth Quarter Exchequer Revenue Performance (April to June 2014)
(Values in Kshs billion)
Department
Customs
Services
Actual 4th
Qtr.
2013/14
Target 4th
Qtr.
2013/14
Perf.
Actual 4th
Qtr.
2012/13
Growth
over 4th Qtr.
2012/13 (%)
Percentage of
Revenue
Contribution
70.6
68.3
103.4%
55.7
+ 26.8%
26.4%
134.6
135.4
99.4%
123.6
+ 8.9%
50.3%
Medium
and
Small Taxpayers
61.5
59.5
103.4%
50.1
+ 22.8%
23.0%
Total Domestic
Taxes
196.1
194.9
100.6%
173.7
+ 12.9%
73.3%
0.8
0.8
100.8%
0.6
+ 31.0%
0.3%
267.6
264.0
101.4%
230.0
+ 16.3%
100.0%
Large
Taxpayers
Office
Road Transport
Total
As shown in the Table 2(a), KRA collected Kshs 284.6 billion against a target of Kshs
279.2 billion (performance of 101.9%). Compared to Kshs 240.1 billion collected in
the fourth quarter of FY 2012/13, additional revenue of Kshs 44.5 billion was
collected (or a growth of 18.5%). With respect to Exchequer revenue KRA collected
Kshs 267.6 billion against a target of Kshs 264.0 billion (performance of 101.4%).
Compared to Kshs 230.0 billion collected in the fourth quarter of FY 2012/13,
additional Exchequer revenue of Kshs 37.6 billion was collected (or a growth of
16.3%).
It is important to note that the fourth quarter growth of 18.5% compares favourably
with the average growth of 15.4% and 17.0% achieved in 2002/03 - 2012/13 and
2010/11 - 2012/13 respectively. In addition, the 4th quarter performance of 101.9%
compares favourably with 101.1% and 99.3% achieved in 2002/03 - 2012/13 and
2010/11 - 2012/13 respectively.
3.1
Customs Services
KRA collected Kshs. 87.1 billion in Customs taxes during the fourth quarter, recording
a performance of 105.2%. Compared to a similar period last year the department
collected an additional Kshs. 22.0 billion representing 33.8% growth. Customs
Exchequer revenue amounted to Kshs. 70.6 billion which is a performance of 103.4%
against target. Compared to Kshs. 55.7 billion collected in the fourth quarter of
2012/13, a growth of 26.8% was realized.
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3.2
Domestic Taxes
During the fourth quarter, KRA collected Kshs 196.5 billion in Domestic Taxes against
a target of Kshs 195.4 billion, which is a performance of 100.55%. Compared to Kshs.
174.2 billion collected in the same period last year, a growth of Kshs. 22.3 billion or
12.8% was realized. Exchequer revenue relating to Domestic Taxes totalled Kshs.
196.1 billion, which is a performance of 100.63% and a growth of 12.9%.
3.3
Road Transport
In the fourth quarter, the Authority collected Kshs. 1.030 billion in traffic fees and
licences against a target of Kshs 1.031 billion, realising a performance rate of 99.9%.
Compared to the fourth quarter of FY 2012/13 when Kshs. 0.21 billion was collected,
traffic fees and licences revenue recorded a growth of 26.2%.
4. Revenue Performance in the Period July 2013 - June 2014
Revenue performance for the period July 2013 - June 2014 is as shown in Table 3(a)
and Table 3(b) below. Table 3(a) gives the overall performance while Table 3(b)
focuses on the Exchequer revenue performance only.
Table 3(a): Cumulative Overall Revenue Performance in the period July 2013 - June
2014
(Values in Kshs billion)
Department
Actual FY
2013/14
Target FY
2013/14
Perf.
Actual FY
2012/13
Growth
over FY
2012/13 (%)
Percentage of
Revenue
Contribution
Customs
Services
331.8
326.2
101.7%
258.7
+ 28.3%
34.4%
Large
Taxpayers
Office
431.0
439.7
98.0%
373.7
+ 15.3%
44.7%
Medium
and
Small Taxpayers
197.3
193.5
102.0%
165.0
+ 19.6%
20.5%
Total Domestic
Taxes
628.3
633.2
99.2%
538.7
+ 16.6%
65.2%
Road Transport
3.7
4.4
84.6%
3.0
+ 21.9%
0.4%
963.8
963.7
100.0%
800.5
+ 20.4%
100.0%
Total
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Table 3(b): Cumulative Exchequer Revenue Performance in the period July 2013 June 2014
(Values in Kshs billion)
Department
Actual FY
2013/14
Target FY
2013/14
Perf.
Actual FY
2012/13
Growth
over FY
2012/13 (%)
Percentage of
Revenue
Contribution
Customs
Services
270.0
266.4
101.3%
220.3
+ 22.5%
30.0%
Large
Taxpayers
Office
429.4
438.1
98.0%
372.2
+ 15.4%
47.7%
Medium
and
Small Taxpayers
196.9
193.1
102.0%
164.6
+ 19.6%
21.9%
Total Domestic
Taxes
626.3
631.2
99.2%
536.8
+ 16.7%
69.6%
Road Transport
3.0
3.6
82.2%
2.4
+ 24.1%
0.3%
899.3
901.1
99.8%
759.5
+ 18.4%
100.0%
Total
As shown in Table 3(a), revenue collection in the period July 2013 - June 2014 stood
at Kshs. 963.8 billion compared to Kshs. 800.5 billion collected in the period July 2012
- June 2013 which represented a revenue growth of Kshs. 163.3 billion or 20.4
percent. This growth is the highest recorded since 2007/08 financial year.
Customs Services Department
Customs Services Department collected Kshs. 331.8 billion during the period July
2013 - June 2014. Compared to a similar period last year the department collected
an additional Kshs. 73.1 billion or 28.3% growth rate.
Domestic Taxes Department
In the period under review (FY 2013/14), Domestic Taxes Department collected Kshs.
628.3 billion. The Department recorded a revenue growth of Kshs. 89.6 billion or
16.6% when compared to a similar period last year.
Road Transport Department
Road Transport Department realised a collection of Kshs. 3.7 billon in July 2013 - June
2014 and recorded revenue growth of 21.9% compared to the same period of FY
2012/13.
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5. Revenue Performance by Broad Economic Category in the Period July
2013 - June 2014
Table 4 below shows revenue performance by Broad Economic Category (BEC).
Table 4: Cumulative Revenue Performance by Broad Economic Category in the
period July 2013 - June 2014
(Kshs billion)
Category
Actual
2013/14
2013/14
target
Perf.
% of Total
revenue
Actual
2012/13
Growth
over
2012/13
80.2
72.1
111.2%
8.3%
67.8
+ 18.2%
o/w Road
Maintenance Levy
28.2
24.7
113.9%
2.8%
25.0
+ 12.6%
o/w VAT Import-Oil
10.6
9.3
114.8%
1.1%
6.7
+ 59.4%
240.5
241.7
99.5%
25.0%
180.4
+ 33.3%
o/w Railway
Development Levy
19.7
20.1
97.9%
2.0%
-
-
o/w VAT ImportOrdinary
114.6
112.5
101.8%
11.9%
88.0
+ 30.1%
o/w IDF
26.6
27.2
97.8%
2.8%
24.3
+ 9.7%
320.7
313.8
102.2%
33.3%
248.2
+ 29.2%
174.1
177.4
98.1%
18.1%
144.2
+ 20.7%
o/w VAT Domestic
108.4
109.2
99.2%
11.2%
88.5
+ 22.4%
o/w Excise Duty
Domestic
35.9
35.8
100.0%
3.7%
33.3
+ 7.8%
452.0
453.6
99.6%
46.9%
392.6
+ 15.1%
o/w PAYE
253.0
258.0
98.0%
26.2%
211.1
+ 19.9%
o/w Corporation
136.0
127.5
106.6%
14.1%
110.6
+ 22.9%
o/w Withholding
56.8
62.5
90.9%
5.9%
65.4
- 13.1%
Sub-total
626.1
631.0
99.2%
65.0%
536.8
+ 16.6%
Fees & Licenses
17.1
18.9
90.2%
1.8%
15.5
+ 10.2%
Total
963.8
963.7
100.0%
100.0%
800.5
+ 20.4%
Customs Services
Petroleum Taxes
Trade Taxes
Sub-total
Domestic Taxes
Indirect
Taxes
Direct
Taxes
Domestic
Domestic
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6.
Key Observations
6.1
Customs revenue
Performance of customs revenue was strongly influenced by VAT collection
which recorded 32.2% growth. Future interventions will focus on addressing
challenges in IDF performance
6.2
Income Tax
Slow down in government funds disbursement adversely affected withholding
taxes especially for contractors.
Both PAYE and Corporation Taxes performed well with former buoyed by
initiatives targeting County payrolls.
6.3
VAT
Strong performance of VAT derived from 2013 reform with overall growth at
27.5% (for both Customs and Domestic VAT) being registered in FY 2013/14
(both for import and domestic VAT). VAT contribution to total collection
increased from 22.9% in FY 2012/13 to 24.2% in FY 2013/14. Interventions
focused on:
a) Customs under-valuation for previously zero rated and exempt items,
b) Taxpayer recruitment initially targeting key business outlets (such as
shopping malls),
c) Previously zero rated or exempt local products/services including
charging of VAT on aid funded projects.
6.4
iTax roll out
The iTax system enables electronic declaration and payment of income and
VAT taxes. Post March 2014 challenges largely addressed and system stability
restored. In addition, a roll-out strategy was developed and implementation
commenced with key focus on:
d) dedicated support structures,
e) countrywide mobilisation, and
f) media campaign/outreach - arrangements in progress
iTax National Support Centre was established at Nairobi Railway Club to
facilitate full technology and communication support. Five supporting centres
will be launched in Mombasa, Nakuru, Kisumu, Eldoret and Nyeri, with mini7
support structures expected to be housed at GoK Huduma Centres. Hardware
and software upgrades continuing to enhance user experience.
6.5
Excise Goods Management System
During the financial year under review, the Authority substantially rolled out all
phases of the Excisable Goods Management System covering wines, spirits
and tobacco. The system which integrates enhanced excise stamps,
production accounting and track and trace system is aimed at eliminating
falsification of production quantities as well as eliminating contraband goods
from the market. In particular, Track and Trace technology helps detect fake
stamps during field enforcement. Production line tracking technology has
been implemented in key tobacco and spirits factories (25 automated
production lines to date). Product seizures, prosecution and fines are imposed
on offenders.
So far, there has been significant growth noted in excise revenue (38% in FY
2013/14). Initiatives are in progress to deepen positive industry response, with
more dividends expected as full system enforcement takes place in FY
2014/15.
6.6
Huduma Kenya Secretariat
As you are aware, Huduma Centres are facilities where services from various
government institutions are provided from the same location. Eight (8) new
Huduma Centres are operational giving services to the public - Kisumu, Kisii,
Nyeri, Mombasa, Kajiado, Nakuru, Eldoret & Embu whilst Three other Huduma
Centres are operational in Nairobi at City square, GPO and Makadara.
Huduma Centres in Kakamega & Eastleigh are expected to become
operational soon. We intend to offer KRA services in all Huduma Centres
countrywide. In addition to that we are currently offering Driving licence
services in 117 PCK offices country wide.
6.7
Transfer of functions to NTSA
Following the establishment of NTSA through NTSA Act 2012, the NTSA formally
took over core RTD functions that have been previously under KRA from 1st July
2014. The process of transferring RTD’s mandate included release of 147 staff
previously working for KRA.
Road Transport regulatory functions including motor vehicle registration,
ownership transfers, licensing, among others will now be executed under NTSA.
On the other hand, KRA will provide revenue collection facilities on agency
basis.
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6.8
Mobile Payment Platform
Mobile payment solution was successfully implemented and currently
available on M-pesa and Airtel Money. Focus on lower end payments
especially for Road Transport services.
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Conclusion
The revenue target for the financial year 2014/15 is Kshs 1,121.5 billion, of
which Kshs. 1,055.99 billion (94.2%) is Exchequer revenues and the balance of
Kshs 65.5 billion (5.8%) represents the various agency revenues that KRA
collects. The Treasury target represents a growth of 16.4% over the revenue
collection in FY 2013/14 (i.e. Kshs 963.8 billion). However, the Exchequer target
represents a growth of 17.4% given that the Exchequer collection was Kshs
899.3 billion in 2013/14. Over the recent past revenue shortfalls have mainly
been the result of the macro economy not performing as forecast. Under
performance of the macro economy poses the greatest risk to revenue
mobilisation.
KRA is committed to delivering on the agreed target through innovative
practices, leveraging on technology and implementation of staff
performance improvement measures.
Finally, KRA thanks compliant taxpayers for continuing to support the country’s
development agenda.
Ongoing reforms in our enforcement arms including the Investigations
Department should provide better impetus in our drive to deter noncompliance.
J. K. Njiraini, MBS
Commissioner General
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