Times Towers, the KRA headquaters. [Photo/the-star.co.ke]Kenya’s revenue is not growing as fast as the economy, the World Bank has said.
The global lender has noted that even though more goods and services have been traded, very little of these economic activities have been taxed. This has seen the Government run huge deficits that have been plugged with more debt.
“Although it (revenues) grew by 13.3 per cent in nominal terms in 16/17, tax revenues expanded by less than nominal GDP 14.9 per cent, hence the tax-to-GDP ratio fell to 16.9 percent of GDP—its lowest level in a decade,” said the World Bank in its 16th edition of Kenya Economic Update, which was unveiled last week in Nairobi.
Tax revenue, said the Bretton Woods institution, is not keeping pace with the expansion in expenditure and the buoyancy of economic growth, bringing into question KRA’s aggressive efforts to ensure tax compliance.
Although agriculture contributes a lot to the economy - about a quarter - the sector paid the least corporate income tax, according to the World Bank.
A slowdown in the economy, particularly following a prolonged electioneering period that started early last year, was to blame.
“For instance, over the past year, the financial sector, which is one of the largest contributors to corporate tax, experienced a slowdown following the interest rate cap — this has in turn reduced their profit margins and tax obligations,” said the World Bank.