The Kenya Revenue Authority (KRA) is facing growing revenue shortage as it grapples with collections, with taxpayers potentially losing about Ksh1.7 trillion in contentious and uncollected taxes.
A report by the Auditor-General reveals that this amount comprises Sh542 billion categorized by the tax authority as “erroneous, uncollectable, and doubtful debts,” along with Sh1.16 trillion in tax arrears that have remained outstanding for more than three years.
“Further, the aging analysis of the arrears of tax receipts indicates that arrears totaling Ksh.1,161,076,105,513 have been outstanding for over three (3) years casting doubt on the accuracy and recoverability of the balance,” read part of the report.
The uncollected tax of Ksh. 542 billion falls under four categories which includes the Pending/outstanding backlog waivers amounting to Ksh. 20,949,940,032 and Erroneous VAT auto assessments at Ksh.10,313,211,906.
Others include the Outstanding tax in dispute of Ksh. 456,040,870,989 and Resolved disputes not updated in taxpayers’ ledgers standing at Ksh. 54,459,005,906.
As of June 2023, unreconciled arrears of revenue balance totaled Ksh.999.6 billion, according to the report.
In the circumstances, the recoverability, completeness and accuracy of the arrears of revenue balance of Kshs.999,599,467,329 could not be confirmed.
However, the statement of receipts and disbursements reflected a total tax receipt collected during the year amounting to Ksh.1,961,969,728,861.
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Unallocated Arrears by KRA
Nevertheless, the total tax receipts balance excluded unallocated revenue balance of Ksh.395,802,640 reflected in the KRA accountability statement for the year under review and held in various accounts.
The unallocated revenue relates to payments remitted to the KRA collection accounts but with missing mandatory information including the taxpayers’ details and Payment Registration Numbers (PRN) while some payments were made using expired PRN.
In addition, the arrears of tax receipts include an amount of Ksh.245,553,868,392 in respect to public sector revenue debt.
“However, third party confirmation from eighty-nine (89) Public Sector Departments (PSD) taxpayers with revenue debt of Kshs.65,525,185,389, revealed balances totaling Kshs.21,071,361,935 resulting to an unreconciled variance of Kshs.44,453,823,454,” the report further noted.
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Long Outstanding Arrears of Revenue
The statement of arrears of revenue reflects non-tax receipts from Government Investment and Public Enterprises (GIPE) amounting to Kshs.267,937,400,728 which comprise of Ksh.180,458,854,968 and Ksh.87,478,545,760 in respect of loan redemption receipts and loan interest receipts, respectively.
The balances include loan redemption receipts of Ksh.40,111,581,511 and loan interest receipts of Ksh.36,763,767,836 which have been outstanding for more than three (3) years.
Further, the non-tax receipts from GIPE also included arrears totaling Ksh.145,289,519,414 as of 30 June 2023 receivable from nine State Corporations that are operational.
The nine entities included the National Water Conservation (Ksh. 2,069,496,885) Tanathi Water Services Board (Ksh. 1,137,037,550), Coast Water Services Board (Ksh. 5,017,030,806), and Tana Water Service Board (Ksh.1,136,067,333).
Others include Athi Water Services Board (Ksh.7,604,908,863), Lake Victoria North Water Service Board (Ksh.1,737,534,827) Lake Victoria South Water Service Board (Ksh.1,587,349,649) Central Rift Valley Water Services Board (Ksh. 322,043,253) and Kenya Railways Corporation 9Ksh.)124,678,050,248.
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