Tax revenue slumps to 5-year low amid Covid-19 measures

Author: DOMINIC OMONDI
AfricaPress-Kenya: Tax collections slumped to a five-year low last month, as the negative effects of Covid-19 continued to hit government coffers.

Taxpayers gave the government Sh90 billion, a drop of slightly over a third compared to Sh134 billion that the taxman collected in May 2019, new data from National Treasury published in the Kenya Gazette shows.

As at the end of last month, Kenya Revenue Authority had collected Sh1.33 trillion and will have to collect Sh130 billion to hit its revised target of Sh1.49 trillion by end of the current financial year on Tuesday.

Bounce back

This even as the Central Bank of Kenya (CBK) Governor Patrick Njoroge yesterday said the Kenyan economy was expected to bounce back in May after a poor period in April when the economy was devastated by the stringent containment measures aimed at stopping the spread of coronavirus.

It is possible that despite an uptick in economic activities (though sectors such as aviation and hotels remained largely inactive during this period), the National Treasury might also have foregone some taxes after President Uhuru Kenyatta directed that consumers be offered some tax reliefs as a means to help them absorb the shocks of the pandemic.

The CBK’s Monetary Policy Committee, among other economic institutions, had projected that gross domestic product (GDP) in the second quarter would decline due to the adverse economic impact caused by the virus.

Severe disruption

“GDP across the advanced economies contracted sharply in the first quarter, mainly reflecting widespread business closures, severe disruptions to trade and supply chains and the collapse in global travel,” said MPC in April.

“The growth is expected to worsen further in the second quarter, with the imposition of more stringent containment measures.”Thousands of businesses have closed shop, leaving millions without a source of livelihood as the government continues to implement social distance rules.

Rules that have reduced economic activities include a dusk-to-dawn curfew, partial lockdown of three counties and a ban on all social and political gatherings. Passenger flights into and out of the country are still banned.By May, the country had borrowed Sh717.2 billion, with more than half of it – Sh409 billion – being net borrowings from the domestic market, according to the gazette notice.

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