KRA faces pressure on tax collection shortfall
Clients seeking services at KRA headquarters, Times Tower, Nairobi on February 23, 2024.
What you need to know:
- The poor tax performance during the current fiscal year has affected operations in national and county governments
- During the five months to the end of November, the Treasury has had challenges releasing cash to counties and ministries.
Pressure is mounting on the Kenya Revenue Authority (KRA) to hit revenue targets for the current fiscal year after it recorded shortfalls in the first five months, managing just 34.6 per cent of the annual tax revenue estimates.
A month to the half-year mark, the taxman collected Sh857 billion against the annual target of Sh2.47 trillion, the latest revenue reports by the National Treasury shows.
The five-month revenue performance means that KRA had a shortfall of about Sh174 billion, going by average monthly collection of Sh206 billion in order to achieve the annual target.
This leaves it with an uphill task to collect almost double the amount it netted during the five months, Sh1.6 trillion, in just seven months to June 2025.
Poor tax performance during the current fiscal year has been attributed to below par key tax heads, which has affected operations in national and county governments as the Treasury experiences delays in releasing monies, also affecting implementation of projects.
By September, for instance- the first quarter of the current fiscal year- the taxman had raised Sh590.9 billion in taxes against a target of Sh605.5 billion as taxes such as VAT, excise and income taxes experienced shortfalls.
“The ordinary revenue collection was Sh590.9 billion against a target of Sh605.5 billion. All ordinary revenue categories recorded below target performance during the period under review except investment income which surpassed the target by Sh16 billion,” Treasury stated in the quarterly budget report.
It said that during the first quarter, VAT had the biggest shortfall of Sh15.1 billion, followed by excise duty, which recorded a Sh5.6 billion shortfall, and import duty having a Sh2.8 billion shortfall.
During the five months to the end of November, the Treasury has had challenges releasing cash to counties and ministries, which has occasioned a disruption of services, including salary payments and implementation of projects across both tiers of government.
KRA in a December 9 statement cited key challenges hindering revenue collection during the five months as being low domestic demand, which indicated a contraction in economic activities and a stagnation of growth in import values, “which is a main source of both raw materials and final consumer goods.”
“The various indicators that significantly impact revenue performance have generally moved contrary to expectations, with adverse impact on revenue mobilisation. Furthermore, the government being a key consumer of VATable goods has applied austerity expenditure measures that negatively affect various key sectors over time,” KRA stated.
