KRA targets drinking water as it runs of options to raise revenue collection

 The Kenya Revenue Authority (KRA) has for the third financial year failed to meet its revenue collection target. KRA was short of Ksh 60.5 billion during the 2018/2019 fiscal year. The failure to meet the revenue collection target implies treasury will have to think harder on how to finance the 2019/2020 3.1 trillion budget that amounts to Ksh 607 billion.

For this financial year, the treasury introduced a number of measures aimed at ensuring KRA meets the revenue collection target of shs 2.4 trillion, and these includes introduction of excise tax on transactions of money beyond Ksh 500,000a t 0.05%, increase of money transfers via mobile services were increased by 2%, from 10% to 12%, a presumptive tax of 15% on SME’s license fees, and exporters of scrap metal to pay 20% as export levy.

The above taxes seems not enough for KRA, as now the revenue authority intends to tax drinking water. Drinking water is a basic human need that ought to be available free of charge, and the only price that ought to be imposed on the commodity is the cost of its purification, distribution, and in case of bottling, the packaging costs. A little profit should also be included in the pricing but just enough to make the companies that distribute or package the water to continue being in operation. Taxing drinking water may lead to many opting for untreated water which may pose serious health challenges. Alternative to taxing drinking water is going after soft drinks especially the juices and the sodas.

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Even as KRA goes after drinking water, it has been argued that the move will not help the taxman raise more revenues as most of the targets will only help reduce the volume of business.  Instead, the government has been encouraged to quit spending more than what it collects to bridge the budget deficit. The government also seems uninterested in actually dealing with revenue deficit problem – corruption. Corruption not only cause several companies to not remit the full tax due to the taxman through tax evasion tactics, but also causes the government to spend more than is necessary on projects, ghost workers, and outright syphoning of the collected revenue to individual pockets.

See also: The first move by Henry Rotich to finance the 2019/2020 Budget is a shs 40 billion loan

Adrian Opiyo

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