The Kenya Revenue Authority (KRA) is on the verge of missing its target of raising Sh2.5 trillion in taxes in the current fiscal year, following collection shortfalls through the first 11 months.
Official data shows that KRA had collected less than Sh1.93 trillion by the end of May out of the revised target of Sh2.49 trillion for the financial year 2023/24, leaving a balance of Sh567 billion to be collected this month alone.
This is a figure more than thrice the average monthly collections KRA has had between July 2023 and May 2024 and means it would have to collect a daily average of Sh18.9 billion each of the 30 days this month, to achieve the target.
The Treasury has admitted to facing the dilemma of either borrowing or taxing Kenyans more, for government to implement projects.
“We have to remember we have a three-dimension problem here: Demands for increased expenditures that means more debt or increase in taxes, limits and constraints imposed on public debt accumulation, debt carrying capacity has a limit, and there are limitations of mobilising higher tax revenues,” Treasury Cabinet Secretary (CS) Njuguna Ndung’u said while delivering the 2024/25 budget speech last week.
Treasury had originally planned to collect Sh2.57 trillion in taxes during the current fiscal year, following a raft of measures that introduced new taxes and levies, including the 1.5 percent Housing Levy and the doubling of Value Added Tax (VAT) on petroleum products to 16 percent.
But despite the taxation measures, KRA has struggled to collect revenues through the year and appears unlikely to achieve the revised target of Sh2.49 trillion.
For each of the five months since January 2024, the highest KRA has collected in taxes in a single month was Sh210 billion in April, when most companies were releasing reports on their performance last year.
In January, the taxman collected Sh165.6 billion, then collected Sh157.6 billion in February, and Sh161 billion in March. Last month, KRA collected taxes totalling Sh183 billion.
In the nine months to the end of March 2024, the Controller of Budget (CoB) observed that KRA lagged behind in collections, compared to a similar period last year.
“During the review period, the Tax Revenue category recorded a performance of 62 percent of the target of Sh2.5 trillion, compared to 66 percent performance (Sh1.39 trillion) recorded in a similar period in FY 2022/23,” the CoB noted in the report on national government’s implementation of the budget during the first three quarters of 2023/24.
The report noted that while, in real terms, tax collections between July 2023 and March 2024 grew by 10 percent, compared to a similar period the previous year due to the implementation of the measures contained in the Finance Act, 2023, the performance against the annual target lagged.
Since July 2008, KRA has only hit tax collection targets set by the Treasury once (in 2021/22 when the authority during the Githii Mburu tenure as Commissioner-General collected Sh2.03 trillion taxes, marking the first time for Kenya to record taxes above Sh2 trillion in a single year.
“The authority registered an above–target stellar revenue performance after exceeding the fiscal year target as stated in the Budget Policy Statement. KRA surpassed the original target of Sh1.88 trillion and two other upward revenue target revisions of Sh1.91 trillion, which was later revised to Sh1.97 trillion,” Mr Mburu said at the time.
