KRA in tough race to collect Sh1.1 trillion in four months

The Kenya Revenue Authority (KRA) collected Sh1.37 trillion in taxes in the eight months that ended February, leaving it with a daunting task of raising an average of Sh280 billion monthly over the next four months to meet its Sh2.5 trillion target for the current financial year ending in June.

Official data shows that between July 2023 and February 2024, tax collections by the KRA were just 55 percent of the revised annual target of Sh2.49 trillion. These collections were less than half (49 percent) of the original ordinary revenue target of Sh2.787 trillion that was set in the budget unveiled in June last year, latest data by the Treasury shows.

Over the first eight months of the 2023/24 financial year, the taxman collected taxes averaging Sh171.7 billion monthly. Based on its annual target to collect Sh2.49 trillion during the financial year, this means that the collections recorded shortfalls averaging Sh36.2 billion monthly.

The shortfalls have left the taxman with a minimal chance of meeting the ambitious revenue targets set by the Treasury in the 2023/24 budget since it would have to raise more than Sh280 billion monthly between March and June — when the current financial year ends.

Read: KRA misses revenue target by Sh107bn

The KRA late last year announced that between July and early December, it had collected Sh1.03 trillion in taxes, crediting the increase, compared to a similar period in 2022, to more collections from fuel products, following the doubling of Value Added Tax (VAT) to 16 percent since July 2023.

“Revenue collection has progressively increased in the last five months (July –November 2023/24) after KRA collected Sh963.746 billion compared to Sh856.646 billion collected in the same period last financial year, representing a growth of 12.5 percent,” KRA’s Commissioner, Strategy, Innovation and Risk management, Mohammed Omar said in a statement.

Petroleum taxes reportedly grew by 42.5 percent between July and the end of November 2023, from Sh19.6 billion during a similar period in 2022.

“The growth was also driven by the positive impact of tax policy which includes the VAT rate change from 8 percent to 16 percent vide Finance Act 2023,” the KRA stated.

Performance against set targets, however, remains low for the authority despite different tax measures introduced by the government last year, which have seen workers and businesses taxed more. With the continued poor tax performance against targets at the end of the first eight months, the Treasury has had to turn to borrowing to keep the government going, borrowing more than Sh1 trillion from domestic and external sources during the period.

By the end of February, the Treasury had borrowed Sh545.6 billion from the domestic market and Sh474 billion from external markets, totalling Sh1.019 trillion.

The borrowing from domestic markets was 64 percent of the Sh852 billion targeted during the current financial year while foreign borrowing was 56 percent of the annual target. As per the revised budget for the current financial year, the government plans to borrow Sh1.7 trillion from domestic and foreign markets.

Read: KRA targets extra Sh282bn from large taxpayers’ pool

“Domestic borrowing of Sh851,898,014,668 comprises of net domestic borrowing Sh471,359,466,739 and internal debt redemptions (roll-overs) Sh380,539,547,928. External loans and grants include Sh208,324,847,510.00 (USD 1,458,740,000.00), being proceeds received in February 2024 from issuance of Eurobond and applied in buying back part of the notes due in June 2024,” the Treasury said in the report published in the Kenya Gazette dated March 15.

During the eight months, the Treasury released Sh156.9 billion towards spending on development activities in the national government and Sh808 billion for use on recurrent activities.

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