The gap between actual and projected revenues in the first four months of the 2024/25 fiscal year to October has hit Sh42.9 billion on underperformance of tax collections.
The shortfall in total revenues is attributed largely to missed targets in the opening months of the financial year even as the Kenya Revenue Authority (KRA) marks a recovery in nettings in recent months.
Total revenue raised in the four months stands at Sh885.3 billion against a target of Sh928.2 billion with ordinary revenue or taxes marking the largest shortfall of Sh48.1 billion compared to the same time last year.
Ministerial appropriations in aid (A-i-A) have meanwhile outperformed the target by Sh5.2 billion, totalling Sh119.7 billion in the period against a target of Sh114.5 billion, according to data from the National Treasury.
“The budget implementation in the first four months of this fiscal year was initially impacted by the withdrawal of the Finance Bill, 2024 and a slowdown in economic activities occasioned by the protest,” said Treasury Principal Secretary Chris Kiptoo.
Value added tax (VAT) registered the largest shortfall at Sh21.7 billion while it was the only tax head to contract in the period as collections fell to Sh202.9 billion from Sh209.2 billion in October 2023.
All other key tax heads registered growth over the review period but underperformed targets.
KRA has nevertheless narrowed the gap in its revenue collection target, beating estimates in October by collecting Sh208 billion against a target of Sh201 billion, registering a 103 percent performance rate.
KRA had missed its tax collection target by Sh35 billion in July, Sh25 billion in August and Sh10 billion in September.
“The disruptions in July are likely what caused a hiccup but there is now a pickup and we are encouraging KRA to focus on more revenue collections,” Mr Kiptoo said.
Ordinary revenue grew by 3.4 percent by the end of October 2024 from a growth of 13 percent in the same period in October 2023. while ordinary revenues were up 7.2 percent from 12 percent.
Budget and Appropriations Committee (BAC) Chairman Ndidi Nyoro has faulted the National Treasury for basing government spending on overly ambitious revenue targets which has resulted in carryover expenditures from previous fiscal years.
“The carryover expenditures are a result of the fact that we keep making the same mistake all the time. For the last 10-years, our ordinary revenue has only averaged a 67 percent performance rate. If you always have a shortfall between targets and collections, why do we have to always budget higher?” Nyoro paused.
“Even when we have very emotive revenue raising measures, the trend in collections has remained the same.”
The withdrawal of the Finance Bill, 2024 opened a Sh334 billion revenue hole in the 2024/25 budget forcing the exchequer to cut expenditure estimates in the first supplementary budget.
The National Treasury is however still banking on tax administration reforms and new proposals contained in the Tax Laws (Amendment) Bill, 2024 to sustain the momentum in revenue.
