The Kenya Revenue Authority (KRA) missed its revenue target for the first quarter of the current financial year by Sh79 billion.
KRA Commissioner-General Humphrey Wattanga told the National Assembly’s Finance Committee that slow economic growth, low oil imports tax exemptions on food-related items and failure by some government entities to remit pay-as-you-earn (PAYE) contributed to the failure to meet revenue targets.
Mr Wattanga said oil revenue recorded a deficit of Sh12.9 billion and a decline of 8.6 percent over the July-September 2022 collections.
He said the tax category performance was affected by a decline in overall oil volumes by 12.4 percent attributed to a drop in fuel consumption from January to June 2023 driven by high pump prices that depressed demand.
The revenue shortfall was also attributed to government tax waivers and exemptions of Sh39 billion and the shrinking of non-oil revenue imports by Sh20 billion.
Mr Wattanga said the total revenue collection in the period between July and September was Sh588.9 billion against a target of Sh665.9 billion.
“This resulted in a performance rate of 88.1 percent against the target, leading to a deficit of Sh79 billion and a growth of 8.4 percent,” he said.
“Exchequer revenue totalled Sh545.3 billion during the period July-September 2023 against a target of Sh617.3 billion, translating to a deficit of Sh72.5 billion.”
Mr Wattanga said domestic taxes collected during the period amounted to Sh389.5 billion against a target of Sh431.2 billion. This, he said, translates to a performance of 90.3 percent with a deficit of 41.7 billion and a growth of 14.9 percent. Customs and Border Control recorded a total collection of 196.1 billion against a target of Sh233.4 billion, a performance of 84 percent with a revenue deficit of 37.3 billion and a decline of 2.7 percent.
Mr Wattanga said although the KRA registered a positive growth in revenue collection compared to a similar period in the last financial year, the authority posted slowed growth of 8.4 percent resulting from a below-par performance from both non-oil and oil taxes, corporation tax, PAYE, and domestic value-added tax.
“Various economic parameters have deviated from expectation,” Mr Wattanga told the committee chaired by Molo MP Kuria Kimani.
“The dip in ministerial expenditure on development projects by more than half in the first quarter of 2023/24 (Sh31.64 billion down from 68 billion over the same period the previous year) has slowed activity on projects such as roads, water, power plants, housing, and electricity transmission lines.”
Mr Wattanga said withholding income tax registered an overcollection of Sh34.4 billion on account of increased remittance from the public sector that grew 99.2 percent.
He said the private sector remittance grew by 40.4 percent mainly driven by interest (42.3 percent), management fees (50 percent), dividends (37 percent), winnings from betting and gaming (107 percent), contractual fees (15 percent) and commissions (20 percent).
Mr Wattanga said the domestic excise surpassed the target by Sh0.6 billion, collecting Sh20.4 billion during the period.
Domestic VAT recorded a 21.6 percent growth to collect Sh63.5 billion while corporation tax collection stood at Sh69.5 billion against a target of Sh89.2 billion.
“The tax head recorded a decline of 2.1 percent over a similar period. There was a significant decline of 20.7 percent in instalment remittance in the Information Communication Technology sector attributable to drop in the first and second instalment taxes mainly from telcos,” Mr Wattanga said.
He said instalment remittance from the finance and insurance sectors exceeded the target by 4.1 percent, with remittances from the banking sector having a growth of 6.8 percent.
“This is on the backdrop of weak performance from banks where profits before tax declined by 0.2 percent as at July 2023. This two sectors-ICT and Finance and Insurance account for 65 percent of instalment remittances in the first quarter of 2023/24,” Mr Wattanga said.
He said Paye realised a collection of Sh126.5 billion mainly driven by enhanced receipts from the private firms that registered a growth of 18.1 percent.
