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THE-STAR.CO.KE Monday, Aprill 24, 2017 14 NEWS BUSINESS REVENUE MOBILISATION Taxman misses third quarter tax revenue target by Sh81.5bn I cut my trip short to London, the city which I have always enjoyed since being sent to Westminster School at the age of 13, and in January 1979 during the ‘’Winter of discontent’’ [Margaret] atcher. e Iranian Revolution also happened that year. Gil Scott-Heron [who was a poet-rapper character] said: ‘’e revolution will not be televised’’, [it might not be in places like the DR Congo], but the Iranian Revolution unfolded on our television screens. After a brief interlude up north at Durham University, I started working in the City of London. So London is to me like Mombasa and I was keen to take the temperature. On my return somewhere in the lounge at Dubai Airport, I learnt that Prime Minister eresa May had called a snap election and then I reflexively [I have always been reflexive about the markets as I have now become about Donald Trump’s tweets which are just so live and direct] looked at the price of the pound. e pound had found an off-ramp, and rallied from just above 1.2500 to the dollar to as high as 1.2900 [momentarily] and closed out the week at 1.2805. I recalled a meeting in Nairobi where I had been laying out a bull case for the pound [I see an eventual return to 1.40 versus the dollar which equates to 144.20 versus the shilling] and the gentleman in question had painted a dystopian future and talked of sub-parity versus the dollar. So allow me to start with the pound. Last week’s price action was an important signal. I see May winning this snap general election by a mile like Shergar did when he won the Epsom Derby. Respectfully, Jeremy Corbyn strikes me as a Neil Kinnock figure, and she is going to parlay her party’s 20-plus- point lead over Labour into a huge majority. Political Risk is not going away, but it’s not going to be about May not having a mandate. at will mark a big shift. ere is a sizeable short position in the pound. ere were a lot of naysayers out there, smelling a good old-fashioned sterling crisis in the air like the fellow I met in Nairobi. ese short sellers are going to be well and truly burned, in my opinion. My ground-level observations from London are as follows. is economy is not going to fall off a cliff. It’s a resilient plucky economy, and has always survived on its wits. Splitting off from Europe is going to prove a big catalyst for getting back in touch with its inner pysche. And in a world of serious uncertainty, the pound has the potential to morph into a Swiss franc, a safe haven as it were. So my point is selling the sterling is yesterday’s call and it’s time to look at this from a different perspective. A very interesting currency pair to look at now is euro- sterling. e first round of the French elections will be reported in the early hours of the morning [which, by the way, was how Brexit and Trump was reported - markets have moved enormously of late in the early hours] and the first reaction will be interesting. Markets have lulled themselves into a sense of security that Marine Le Pen will not break clear of the pack in the first round [she is scoring around 23% and anything above 26.5% will be noteworthy and something close to 30% would send the Euro into a tail-spin], and be triangulated in the second round. If we see a big score from Marine Le Pen and that would be something around 30%, we shall see a big reaction to the downside. Anything in line with 23% will spark a further rebound in the euro. Le Pen has already served notice on the euro and her desire to press the exit button. Euro-sterling was last trading at 0.8374 [one year trading range 0.7600-0.9100] and is a currency pair worth keeping an eye. I expect a move back to 0.7600. Crude oil crashed and burned big last week. West Texas Intermediate for June delivery dropped $1.09, or 2.2 %, to $49.62 a barrel on the New York Mercantile Exchange. It’s the lowest close since March 29. I expect further selling and a move back to $47.00 and a break below that would bring $40.00 a barrel into view. Some oil producers had started to get ‘’cocky’’ but look at Caracas which is a harbinger for other oil capitals. Gold closed out the week unchanged week on week and at $1,285.00 an ounce. I see gold reading $1,350.00 over the next few months. e point is that geopolitical risk, while elevated, has entered a new normal. President Trump has injected a neck-jerking whiplash level of uncertainty into the equation. We live in interesting times, that’s for sure. Aly-Khan Satchu is a financial analyst EXPERT COMMENT ALY KHAN SATCHU e UK economy is not going to fall off a cliff Treasury CS Henry Rotich with Kenya Revenue Authority commissioner general John Njiraini during a press briefing in Nairobi on October 3, 2016 /FILE e collection is , however, Sh92.87 billion more than Sh775.88 billion the Kenya Revenue Authority netted the year before Tax collection in nine months through March 31 fell short of the Sh950.25 revised target by 8.58 per cent on pro rata basis, fresh official data shows. National Treasury CS Henry Rotich says in the Statement of Actual Reve- nues and Net Exchequer Issues, pub- lished in the Kenya Gazette on Friday, total tax revenue stood at Sh868.75 billion against Sh1.267 trillion full- year target. is is, however, Sh92.87 billion, or 11.97 per cent, more than Sh775.88 billion the Kenya Revenue Authority collected in the same period of last financial year. e collection ac- counted for 64.83 per cent of govern- ment’s total revenue of Sh1.34 trillion in the nine-month period. e total 2017-18 to the National Assembly on March 30. e Treasury has been keen on growing ordinary revenue in a bid to cut fiscal deficit, which is covered through borrowing which has become more expensive since Kenya became a lower middle-income country in Sep- tember 2014. Rotich has forecast the deficit to reduce to six per cent of the gross domestic product next financial year from a projected 8.3 per cent this fiscal year ending in June. Fitch Ratings said on Friday the deficit for this financial year is higher than the firm’s 7.1 per cent forecast. “e impact on Kenya’s sovereign credit profile will depend on the au- thorities’ ability to deliver ambitious revenue increases and keep control of spending in an election year,” Fitch said, upholding Kenya’s B+ sovereign rating with a negative outlook. CONSTANT MUNDA @mundaconstant More Business news on our website. Scan this quick response code using your smartphone revenue is a growth of 8.06 per cent over the Sh1.24 trillion in first nine months of 2015-16 financial year. e taxman has been undertaking reforms aimed at increasing tax com- pliance, conservatively estimated at just over 50 per cent, and seal loop- holes used by companies and individ- uals to avoid or evade paying tax. e reforms include linkage of KRA’s online tax filing platform, iTax, with third-party databases. e first phase of the project started last De- cember, and is targeted at companies doing business with the government through the Integrated Financial Man- agement Information System. “We will maintain strong revenue effort by bolstering our tax adminis- tration procedures to minimise rev- enue leakages and leverage on infor- mation technology,” Rotich said in the budget statement for financial year REUTERS/ German Finance minister Wolfgang Schaeuble is not worried by the prospect of cuts to corporate tax rates in the United States, he told German magazine Wirtschaftswoche on the sidelines of the IMF and World Bank spring meetings in Washington. US President Donald Trump on Friday promised a big announcement about tax reform shortly and ordered a review of Obama-era tax rules written to discourage US companies from relocating overseas to cut their tax bills. “US corporate tax rates are among the highest in the world,” the magazine quoted Schaeuble as saying. “If the United States lowers its corporate taxes to European or international levels that won’t bother me a bit. Just the opposite.” At the same time, Schaeuble said he opposed plans for a systemic change to taxation of companies based on their country of origin and a protectionist border tax favoured by US House Speaker Paul Ryan, the magazine reported. e Trump administration has criticised Germany for its large trade surpluses with the US, while Germany has said its companies make quality products that customers want to buy. During the election campaign, Trump initially issued a plan that included proposals for cuts in tax rates for individuals and corporations, a repeal of the estate tax, an offshore profits repatriation tax holiday for multinationals and a cap on the deductibility of business interest. PROTECTIONISM US corporate tax reform plans do not worry Germany — Finance chief German Finance minister Wolfgang Schaeuble /COURTESY
