NAIROBI  - Kenya's tax revenues rose 13 percent in the first half of the 2012/2013 fiscal from a year ago on the back of a wider tax base, the Kenya Revenue Authority (KRA) said on Monday. The collecting agency was cautiously optimistic about meeting its annual target, although it cited concerns over upcoming elections.
Small and medium and small taxpayers were largely behind the rise, which was dampened by a slowdown in economic growth against earlier projections, the KRA said.The agency collected tax amounting to 380.65 billion shillings ($4.39 billion) from July through December, up from 338.19 billion shillings previously, John Njiraini, the KRA commissioner general told a news conference.
Njiraini declined to say what the first half tax collection target was, but said efforts to improve tax compliance from among the medium and small businesses had borne fruit after their contributions had increased by 22 percent.
Njiraini said he was hopeful of meeting the financial year's revenue target of 881.2 billion shillings, which would be a 24.6 percent increase from the previous fiscal year, but warned the national election set for March 4 could slow collections. "The uncertainty surrounding the election process could have some dampening effect on (economic) activity and therefore means revenue collection may not be as strong as it could be," he said.
Kenya holds presidential and parliamentary polls, and the east African economic powerhouse has experienced a slowdown in growth ahead of its previous national polls as investors take a wait-and-see attitude, according to the World Bank.
After the last vote five years ago, deadly violence seriously disrupted the country and economic growth.
A slowdown in the country's economic growth in the half first of its current fiscal year to 4.7 percent against a forecast expansion of 5.5 percent had hurt revenue collection, Njiraini said.
High commercial bank lending rates could also hurt economic growth and tax revenues, at a time when Kenya is struggling to cover civil service wages after agreeing to huge salary increases for teachers, doctors and the police.
Commercial banks' lending rates have remained stuck at about 20 percent even after policymakers cut the central bank rate since July by a total of 850 basis points to 9.50 percent in line with falling inflation.
"High (interest) rates may work against encouraging commercial activity and therefore businesses are not as profitable," said Njiraini.
($1 = 86.7500 kenyan shillings)