KRA's Uphill Battle: Racing to Collect Sh1.1 Trillion in Four Months
The Kenya Revenue Authority (KRA) gathered Sh1.37 trillion in taxes over the eight months concluding in February, presenting a significant challenge of raising an average of Sh280 billion per month over the following four months to reach its Sh2.5 trillion goal for the ongoing fiscal year ending in June.
Official figures indicate that from July 2023 to February 2024, tax collections by the KRA amounted to only 55 percent of the revised annual target of Sh2.49 trillion, which was less than half (49 percent) of the original revenue target of Sh2.787 trillion set in the previous year's budget unveiled in June.
Throughout the initial eight months of the 2023/24 financial year, the KRA collected taxes averaging Sh171.7 billion monthly, resulting in shortfalls averaging Sh36.2 billion per month based on the annual target of Sh2.49 trillion for the fiscal year.
These shortfalls have significantly reduced the likelihood of the KRA meeting the ambitious revenue targets set by the Treasury for the 2023/24 budget, as it would need to increase collections by more than Sh280 billion monthly between March and June, the end of the current financial year.
The KRA reported last year that between July and early December, it had collected Sh1.03 trillion in taxes, attributing the increase compared to a similar period in 2022 to higher collections from fuel products following the doubling of Value Added Tax (VAT) to 16 percent since July 2023.
Mohammed Omar, KRA’s Commissioner for Strategy, Innovation, and Risk Management, noted that revenue collection had progressively increased in the last five months (July–November 2023/24) with a growth of 12.5 percent compared to the same period last financial year, citing a significant growth in petroleum taxes by 42.5 percent from July to the end of November 2023.
Despite the implementation of various tax measures by the government last year, which resulted in increased taxation for workers and businesses, the KRA's performance against set targets remains low. This poor performance has forced the Treasury to resort to borrowing to sustain government operations, with over Sh1 trillion borrowed from domestic and external sources during the period.
As of February, the Treasury had borrowed Sh545.6 billion from the domestic market and Sh474 billion from external markets, totaling Sh1.019 trillion. Domestic borrowing accounted for 64 percent of the Sh852 billion targeted for the current financial year, while foreign borrowing accounted for 56 percent of the annual target. According to the revised budget, the government plans to borrow Sh1.7 trillion from domestic and foreign markets for the current financial year.
The Treasury's report published in the Kenya Gazette dated March 15 outlined that domestic borrowing of Sh851,898,014,668 comprised net domestic borrowing of Sh471,359,466,739 and internal debt redemptions (roll-overs) of Sh380,539,547,928.
External loans and grants included Sh208,324,847,510.00 (USD 1,458,740,000.00), with proceeds received in February 2024 from the issuance of Eurobond being utilized to buy back part of the notes due in June 2024. During the eight months, the Treasury allocated Sh156.9 billion for development activities in the national government and Sh808 billion for recurrent activities.
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