Tax collection in the first half of this financial year rose by a modest 6.63 per cent compared to a similar period a year ago but lagged the ambitious Treasury target, fresh data shows.
The Kenya Revenue Authority (KRA) netted about Sh630.37 billion in the July-December period compared to Sh591.17 billion in a similar period in 2016, Treasury secretary Henry Rotich says in the latest report.
The KRA will now have to collect nearly Sh134.94 billion monthly between January and June to hit the Sh1.44 trillion full-year target for tax income.
Non-tax income dropped by Sh4.76 billion in the July-December period to Sh26.53 billion compared to the year before, the exchequer data shows.
Revenue in the first half of the current year was constrained by reduced economic activity — largely due to a bruising presidential contest which delayed investment decisions — and credit crunch in the private sector.
Mr Rotich last week revealed ordinary revenue – tax and non-tax receipts – underperformed the five-month target to November by Sh29.7 billion.
Appropriation in aid to ministries was also behind by Sh22.9 billion, bringing total revenue shortfall in July-November period to Sh52.6 billion.
The Treasury did not disclose half-year target for ordinary revenue, but indicated there was a shortfall with recovery expected in the second half.
The “main revenue tax heads” underperformed in the five-month period amid “elevated expenditures pressures” towards food import subsidies, repeat presidential poll and salary raise for university lecturers and nurses, Mr Rotich said.
That led to reallocation of development funds to recurrent spend, which gobbled up Sh413.05 billion of the budget in the six months period.
“Our concern is on development spending which trailed at Sh94.21 billion against a pro-rated Sh175.52 billion,” Genghis Capital analysts said in a note on Monday.
“Overall, our worry lies on the underperformance in the revenue collection but we applaud intended reforms, as indicated in the 2018 Budget Policy Statement, to mitigate revenue slippages.”
The measures include the ongoing rollout of Integrated Customs Management System (ICMS) to prevent revenue leakage at the customs, linkage of iTax with Integrated Financial Management Information System (IFMIS ) data to enhance compliance and, boosting of investigations and intelligence capacity to support revenue collection.