The Kenya Revenue Authority (KRA) did not meet its revenue collection target during the initial five months of the 2023/2024 fiscal year.
The taxman collected Sh1.03 trillion between July and the end of last week, with November revenues recording a 15.8% growth to Sh180.7 billion compared to the same month in 2022.
From July to November, the tax authorities collected Sh963.7 billion, constituting 34.6% of the Sh2.787 trillion target for the 2023/24 financial year.
In a comparable period of the previous year, KRA collected Sh856.6 billion, accounting for 40% of the Sh2.145 trillion annual target.
“Revenue collection has progressively increased in the last five months (July –November 2023/24) after KRA collected KSh 963.746 billion compared to KSh 856.646 billion collected in the same period last financial year, representing a growth of 12.5%,” KRA noted.
Revenue performance during the period received a significant boost from a 42.5% growth in taxes from petroleum products, attributed in part to the increased value-added tax (VAT) on these products since July.
Additionally, customs revenue recorded a notable 17.6% increase, reaching Sh72.1 billion in November, marking the second-highest monthly collection of customs duty in the history of KRA.
The taxman says the “good performance” is credited to oil taxes, amounting to Sh27.943 billion, reflecting a growth rate of 42.5% compared to the Sh19.610 billion collected in the corresponding period of the previous financial year. This positive outcome in oil taxes was primarily fueled by a 36.7% increase in overall oil volumes and a 49.5% rise in values.
KRA also attributes the growth to the favorable impact of tax policy, notably the VAT rate adjustment from eight percent to 16 percent as per the Finance Act of 2023.
In November, domestic taxes reached Sh108.2 billion, reflecting a growth of 14.7% from the Sh94.3 billion recorded in November 2022, according to the tax authorities.
The KRA also noted that revenue collection is being challenged by factors such as the depreciation of the shilling and escalating commodity prices, contributing to a decline in import demand.
The authority reported, “While import values (in Kenya shilling terms) grew by 36 percent and 11 percent in November 2023 and July—November 2023, respectively, in dollar terms, the growth for the month was subdued to nine percent and a decline of 9.2 percent recorded cumulatively.”
KRA has set a target of Sh2.787 trillion for the fiscal year ending in June 2024, but collections have fallen below the target in the initial five months of the financial year.
In the first quarter of the 2023/2024 financial year, KRA collected KSh 123.04 billion in PAYE, falling short of the Sh 142.93 billion target.
The National Treasury, in the 2023 Budget Review and Outlook Paper, attributed the missed target to delayed disbursements.
The shortfall of Sh 19.88 billion (13.91%) represents the largest margin since the COVID-19 pandemic period when the government implemented tax reliefs.
