The Kenya Revenue Authority (KRA) will receive an additional Sh12.9 billion in funding to help with tax administrative measures aimed at enhancing compliance and broadening the tax base, a new report from the National Treasury has shown.
This will push KRA’s funding from the National Treasury to Sh36.6 billion after the taxman was initially awarded Sh23.7 billion for the 2023/24 fiscal year.
These administrative measures, contained in the Medium Term Revenue Strategy (MTRS), are aimed at, among others, expanding the tax base by recruiting new taxpayers into the tax net, simplifying tax procedures, and ensuring timely tax refund.
The MTRS will be implemented within a three-year period beginning from the fiscal year beginning July this year to June 2027.
“Tax policy reforms will be implemented through the Finance Acts and Regulations, beginning with the Finance Act, 2024 and will not require additional resources from the Exchequer,” said the National Treasury in the 2024 Draft Budget Policy Statement (BPS).
The National Treasury reduced the budget for the KRA to Sh23.7 billion for the financial year 2023/24 down from Sh26.3 billion that the taxman had received in the previous period.
In the fiscal year 2024/25 the KRA is expected to collect Sh2.96 trillion in ordinary revenue –including income tax, import duty, value added tax (VAT), Excise duty and investment income –up from a projection of Sh2.6 trillion in the current fiscal year. Some of the VAT reforms of the MTRS include the proposal to harmonise Kenya’s VAT with that of the other countries in the East African Community (EAC) and the introduction of the 16 percent VAT, a sales tax, on insurance services.
Proposed changes on income tax include the reduction of corporate tax from 30 to 25 percent, re-introduction of the one percent minimum tax on turnover; and the introduction of withholding tax on payments for goods supplied to the government, similar to services, as an advance tax.
