The Kenya Revenue Authority (KRA) missed the tax collection target in the first half ended December by Sh163.46 billion, highlighting the impact of the rejection of the Finance Bill, 2024.
Disclosures in the Kenya Gazette show that KRA raised Sh1.07 trillion in the period, which was below the Sh1.23 trillion that the taxman needed to collect, in order to stay on track of meeting the Sh2.47 trillion targeted for the full financial year ending June 2025.
The miss came in the period when the government was forced to drop a raft of proposed taxes in the Finance Bill, 2024, in a bid to quell protests that rocked the country from June.
The collections in the first half of the current financial year were however Sh23.15 billion higher than what KRA raised in the same period a year earlier.
Despite the missed target, the Parliamentary Budget Office (PBO) said that rejection of the Finance Bill, 2024 offers the government a chance to grow taxes by revamping the collection system, instead of burdening Kenyans with more taxes.
“Rather than relying on the introduction of new tax policies that are likely to create new tax burdens on Kenyans, the government may focus on improving tax administration through better enforcement of current tax policies, enhanced data analytics, and increased use of technology to simplify tax processes and improve tax compliance,” PBO says in its latest review of the country’s taxation plan.
The National Treasury had warned that KRA would miss the revenue target for the current financial year in the wake of the rejection of the Bill.
President William Ruto was in July last year forced to drop the contentious Bill, bowing to mounting pressure from Kenyans amid an escalation in anti-tax protests.
PBO has also faulted Treasury’s seemingly obsession with new taxes, saying that burdening taxpayers with fresh levies does not guarantee higher revenue collection.
The collection in the first half of the current financial year were Sh23.15 billion, more than what KRA raised in the same period to December 2023, helping the Exchequer to spend more on development projects and pensions payments to senior citizens.
Some Sh129.82 billion was splashed on development projects in the first half of the current financial year, marking a jump of 84.4 percent from the Sh70.4 billion spent in the same period to December 2023.
Money for development projects like roads has over the years been squeezed largely due to mounting debt servicing obligations amid missed revenue collection targets.
The Exchequer also spent Sh82.8 billion on pension payments and gratuities in the first half of the current financial year, a rise of 44 percent from Sh59 billion that was used in the corresponding period of the financial year to June 2024.
Some Sh82.8 billion was used to pay pension and gratuities in the same period, a rise of 40 percent from the Sh59 billion that the retired civil servants received a year earlier.