Interventions by the government to lower cost of living are negatively impacting revenue collection by the taxman.
Kenya Revenue Authority (KRA) has admitted that the policy and administrative measures taken in the current year have negatively impacted its operations. Such interventions include reduction of duties and taxes on petroleum and food products.
The proposals in the 2011 budget statement included the removal of excise tax on Kerosene and the continued implementation of the Common External Tariff (CEF) on rice to allow importation of 35% as opposed to 75%. This has significantly reduced revenue collection from rice importation. There was also reduction of duty on imported wheat from 10% to 0% and reduction of duty on imported maize.
These measures have forced the taxman to find alternative means of generating revenue such as enforcing property tax that would see landlords raise rent and the proposal to have Kenyans above 21 years file tax returns.
KRA is obligated to provide the financial resources required for the implementation of the new constitution, yet its hands are tied up by tax cuts.