The Kenya Revenue Authority (KRA) must collect an average Sh12.26 billion daily over the next 14 days if it is to meet the tax revenue target for the current financial year even as the shortfall forced President William Ruto to cut this year’s budget.
Figures released by the National Treasury yesterday show that KRA has collected a total of Sh1.74 trillion in tax revenue for the first 11 months of the financial year 2022/23.
This means that the tax agency collected Sh167.18 billion in May, a significant drop from the Sh180.22 billion that it collected in April.
This means that over 30 days in June, KRA must collect Sh12.26 billion daily to hit this target before the close of the financial year in a fortnight.
This is however an uphill task for the tax agency that has struggled to hit its collection targets amid an economic slowdown.
The lower-than-projected revenue collection has forced the government to cut the budget to bring it more in line with the fiscal realities that it is facing at the moment with it being almost a foregone conclusion that it will miss the revenue target.
In the second supplementary budget submitted to Parliament this week by Kiharu Member of Parliament (MP) Ndindi Nyoro, who is also the chairman of the National Assembly’s Budget and Appropriations Committee (BAC), the National Treasury has reduced the financial year 2022/23 budget by 1.6 per cent.
In the mini-budget, development expenditure has been cut by 19.2 per cent to Sh579.21 billion while recurrent expenditure has been increased by 7.3 per cent to Sh1.506 trillion.
“The overall change in the national government ministerial budget (excluding consolidated fund services (CFS) and county allocations) from the original approved ministerial budget is a decrease of Sh33.5 billion,” said Prof Ndung’u.
The struggles to raise enough revenue come on the back of an economic slowdown which was especially hit by a severe drought that saw the agricultural sector shrink for the second year in a row.
Kenya’s gross domestic product (GDP) grew by 4.8 per cent in 2022, according to the Economic Survey 2023, which is a sharp decline from a growth of 7.5 per cent in 2021.
The economic slowdown was partly driven by the poor performance of the agricultural sector, which is the driver of Kenya’s economy, that shrunk by 1.6 per cent during the period.
Despite the challenging economic environment, the Treasury has projected to increase tax revenue collection to Sh2.571 trillion in Dr Ruto’s maiden Sh3.68 trillion budget for the financial year 2023/24.
MPs have however warned the Treasury against making such ambitious tax revenue targets which have often seen the government make lofty budgetary allocations that it thereafter struggles to fund.
“The Committee notes with concern that this revenue target is quite ambitious, taking into account that historically, ordinary revenue has grown at an average of around 10 per cent,” said BAC in its report for the financial year 2023/24 budget.
It added: “Further, the downward revision of GDP growth projection is indicative of a concomitant reduction in revenue collection.”
