Kenya’s tax receipts for nine months of this financial year ending June trailed the target by more than Sh300 billion on a prorated basis despite growing by a double-digit rate, pointing to an ambitious goal under painful IMF-backed economic reforms.
The Kenya Revenue Authority (KRA) collected nearly Sh1.54 trillion in the review period through March 2024, data Treasury Secretary Njuguna Ndung’u published shows.
The collection represents a 10.17 percent rise over the Sh1.39 trillion realised in a similar period a year earlier when an increase of 8.59 percent year-on-year was realised.
As a result, the collection for the nine months through March was Sh336.80 billion short of the prorated goal of Sh1.87 trillion.
The performance came at a time when the government enforced new and higher taxation measures as part of the IMF-backed reforms aimed at raising additional revenues.
Analysts have blamed the IMF for setting unrealistic tax targets for Kenya as part of its budgetary support programme. The IMF support boosted confidence among international investors to lend Kenya $1.5 billion on February 13.
The successful Eurobond issue helped Kenya pay $1.44 billion (Sh190.08 billion at a conversion rate of Sh132 per unit) of the $2 billion (about Sh264 billion) repayment due in June, allaying fears of a default.
“Kenya has tried very hard to avoid default. But in doing so, the IMF has steadily increased the medium-term primary balance target that Kenya has to hit, which explains why every Kenyan tax is going up and up,” Peter Doyle, a former senior economist with the IMF, said earlier this month.
As part of the IMF-backed reforms, the William Ruto administration enforced the 16 percent value-added tax on fuel in its first year in office, a reform that his predecessor, Uhuru Kenyatta, had failed to fully implement in a decade.
Kenya has tapped more than $2 billion from the ongoing debt programme with the IMF that lapses in April 2025.
The loans from the IMF and the World Bank come with conditions for the government to observe discipline and raise more taxes, cut expenditure, and narrow the deficit.
As a result, Kenya has been pushed to raise taxes on beer, phones, and airtime, introduce digital and corporate minimum taxes, and roll out plans to privatise, merge or close loss-making State corporations.
The Ruto administration has pledged more tax-related reforms through the proposed Medium Term Revenue Strategy that is undergoing a public participation phase.
The strategy, whose outcome will come into force from July 2024, proposes to restrict zero-rating for VAT to the export of goods and services, while exemptions will apply to goods supplied in raw form.
“Our intentional, consistent, and sustained efforts, here and abroad, have enabled us to normalise our relationships with the International Monetary Fund, World Bank, the African Development Bank, and various development partners to such an extent that they are now working with us to implement the Bottom-Up Economic Transformation plan,” Dr Ruto said in his State of the Nation Address last November.
Sh320bn monthly
Despite increased collections, the receipts for nine months through March 2024 make up 61.51 percent of the nearly Sh2.5 trillion tax revenue target for the full-year period.
That is the lowest performance rate in nine months since the Treasury started publishing the monthly exchequer data under the Public Finance Management Act of 2013.
This means the taxman needs to net Sh960.76 billion in the remaining period of the fiscal year to hit the target, translating to a monthly average of Sh320. 25 billion.
In the nine-month review period, the KRA netted an average of Sh127.92 billion per month against the targeted Sh207.99 billion to meet the full-year Treasury goal.
