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Region’s tax bodies grapple with growing deficit
Revenue authorities in East Africa face an uphill task of trying to meet increased targets and narrow the growing deficits in their countries’ budgets.
Tanzania, Uganda, Rwanda and Kenya have all revised their revenue targets upwards in their budget statements.
Tanzania, which suspended its revenue chief Rished Bade and five others last November over inefficiency, has revised its targets by 14 per cent.
Tanzania’s Finance and Planning Minister Philip Mpango said the country would seal loopholes at the Tanzania Revenue Authority (TRA) and improve collection mechanisms.
“We are looking at the tax exemptions as an area of leaks. We will tighten this area through appropriate legislation to help us achieve our collection targets,” said Dr Mpango.
In the budget estimates presented to parliament, TRA is expected to collect $2.59 billion from international trade taxes, $1.74 billion from domestic taxes and $2.36 billion from corporate tax, withholding tax and levies.
Thanks to President John Magufuli’s ongoing crackdown on revenue leakages, TRA is poised to meet its 2015/16 revenue collection target, collecting $3.82 billion as of March this year against its June, 2016 target of $5.51 billion, with TRA confident about meeting the $2 billion target balance before the end of June.
Above targets
“We have seen our collections since December staying above target. We have sealed tax loopholes at the port and enforced tighter controls and supervision,” TRA acting commissioner-general Alfayo Kidata said.
In March, Uganda unveiled tax proposals that it expects will boost its revenues collection as it seeks more funding for its growing budget after the Uganda Revenue Authority (URA) missed its revenue targets by $71.6 million in the first three months of this year.
This shortfall was attributed to uncertainty over the February elections.
According to Dickson Kateshumbwa, URA Commissioner of Customs, Uganda’s total revenue performance was at 102.35 per cent within the first six months of the financial year
“We are working to correct the deficit experienced during the election period. The prevailing circumstance of the deficit was temporary and we believe we will achieve the set targets for the current and next financial year,” said Mr Kateshumbwa.
Uganda also saw an 8.4 per cent drop in imports revenue. Last month, the government tightened its Excise Duty Act 2014, which saw additional taxation on several items including fuel, cigarettes, spirits, cement, confectioneries and vehicle lubricants and oil.
Rwanda has revised its revenue collection target upwards to $1.55 billion, which is higher than the $1.38 billion target in the 2015/16 budget.
In the first six months of the 2015/16 financial year, the Rwanda Revue Authority (RRA) collected $619 million against a target of $566.3 million.
RRA Commissioner-General Richard Tusabe said that with the expected rollout of an automated system for local government tax management, the collection is set to increase.
“We are intensifying monitoring mechanisms on the usage of electronic billing machines (EBMs) and e-Tax filing, which should see us increase compliance and reduce tax leakages,” said Mr Tusabe.
In the six months to December, Rwanda saw its tax revenue rise to $609.6 million, above its target of $598.4 million. Its non-tax revenue collection grew to $9.33 million, against the target of $6.83 million.
Decentralised taxes and fees, which include income tax, rental tax, property tax and trade licence fees grew to $17.6 million but failed to meet the target of $19.5 million.
Tight spot
In Kenya, the revenue authority will be in a tight spot this year after it failed to meet its 2015/16 revenue collection targets, forcing the government to borrow from the international market.
National Treasury Cabinet Secretary Henry Rotich said they have engaged a consulting firm to look into Kenya Revenue Authority’s business processes and systems and propose realistic adjustments that can reverse the shortfalls.
KRA in the nine months of this financial year recorded a revenue shortfall of $670 million, due to a huge shortfall in ordinary revenue collection made up of a $260 million deficit in Pay As You Earn (PAYE) revenue and a $159 million shortfall in VAT collection from imports.
As at December last year, KRA had collected $8.42 billion against a target of $9.11 billion. The missed target was $880 million higher than its collection over the same period in the 2014/15 financial year.
Kenya’s National Treasury had KRA set a 20.9 per cent revenue growth target but the revenue authority was only able to achieve slightly above 50 per cent, registering 11.7 per cent growth. “We have seen weak business performance pull down our corporation tax revenues. We have also seen banks booking heavy provisions on non-performing loans, which doesn’t augur well for us,” said KRA Commissioner-General John Njiraini.
KRA has blamed the missed collection targets on the delayed rollout of the Excise Duty Act 2015, which would have seen the government collect an additional $250 million. However, the law came into effect at the end of last year, which signals some improvements in the next financial year.
In the past financial year, Kenya was the only country that failed to meet its revenue targets, registering poor growth, while Rwanda led Tanzania and Uganda in meeting their revenue targets.
In the nine months to March this year, KRA saw the Road Maintenance Levy Fund post a 48 per cent growth in revenue to $3.24 billion, while the new VAT laws saw a 23.2 per cent growth in domestic VAT collection to $1.12 billion, which was higher than its $1.04 target.
Import duty, excise tax on imports and the domestic excise tax collections were also above target, with the latter raising $340 million. On the flipside Import Declaration Fees and the Railways Development Levy recorded negative growth of 4.3 per cent and 10.4 per cent respectively.
