Revenue collection within the EAC expected to decline due to the unfolding economic slow down

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By EA Trade Review Team


Revenue collection in the East African Community (EAC) partner states might decline due to the unfolding economic slow down due to exchange rates volatility and high inflation.


The Kenya Revenue Authority (KRA) has already warned that tax collection will drop mainly due to reduced imports due to the weakening of the shilling that has been witnessed across the region.



Central Bank Governors from the five EAC partner states met in Nairobi Wednesday to draft a regional approach to the twin problems but analysts fear that external shocks might continue to impact negatively on the currencies.


According to KRA commissioner general Michael Waweru, import volumes are likely to drop as they had become expensive due to the weakening shilling and tightening of monetary policy that has made credit from commercial banks expensive.


“A continuation of the trends witnessed in the first quarter will undermine revenue performance in the second quarter of 2011/12 fiscal year,” said When Weweru who reported a 14 per cent increase in revenue collection in the first quarter -July to September.


Despite the economic environment, KRA will go the extra mile to mobilize revenues so that the Government can implement its policies.”


During the period trade taxes contributed 36.5 per cent of the total revenue while direct taxes (42.3 per cent) and indirect taxes (19.5).


Waweru said Sh161 billion was collected during the period compared to 140.4 billion in a similar period last year representing a 14.7 per cent growth.


Custom services that is likely to bear the brunt of the ongoing economic uncertainties raked in Sh60.4 billion, domestic taxes 99.8 billion and road transport Sh711 million mainly from licences and other penalties.


Petroleum taxes recorded a slight improvement of 3.9 per cent though VAT on oil imports was the key achieve recording a 96.4 per cent growth while excise duty on the same declined 12 per cent.


“The poor performance of the sector is attributable to the rising prices of oil in the world oil markets which undermined import volumes and depreciation of the Kenya shilling against major currencies,” said Waweru.


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