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Economic recovery helps boost tax revenue

15 January 2014, 10:05

Nairobi - Kenya's tax revenue in the first half of fiscal 2013/2014 rose almost 24 percent over the same period a year earlier, the tax agency said, helped by an economic recovery and tax reforms.

East Africa's biggest economy, which had slowed before the March 2013 elections, has been implementing reforms to seal loopholes and cut widespread non-compliance.

Its economy is expected to have grown by between 5.5 and 6 percent in 2013, up from 4.6 percent in 2012.

The government collected 470.8 billion shillings during the period against a target of 470.2 billion, John Njiraini, commissioner general of taxes, told a news conference. The tax year runs from July to June.

The figure represented a growth of 23.7 percent over the same period in the previous fiscal year.

"We have done strongly partly because of the VAT act," Njiraini said, referring to a new value-added tax law that came into force last September. The law cut the number of exempted items, raising prices of nearly all commodities.

Njiraini said a plan to reform income tax - which normally makes up the biggest share of total state revenue - would take longer because it was more complex and would require the appointment of a commission to guide the process.

A proposed single customs territory bringing together east African states could help cut cases of dumping of goods in transit through Kenya, a practice that has been blamed for choking local manufacturers' ability to compete, Njiraini said.

Importers bring in goods such as dry-cell batteries through the port of Mombasa, avoid duty by declaring they are destined for neighbouring nations, then sell them locally at low prices.

"We are a major transit country and we believe that when importers from those other countries start paying duty at the first port of duty (Mombasa), it removes the incentive for people to dump," he said.

The tax agency is also planning to establish a unit dedicated to the nascent mining and oil industries to ensure the country collects its fair share of revenue.

Tullow Oil struck promising oil finds in the north of the country in 2012, while Australia's Base Resources will start shipping titanium from its mine at the coast this month.

"We are not well prepared. If you look at the extractive industry, it is a whole new ball game for Kenya," Njiraini said.

- Reuters


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