State spending plan takes a hit as KRA misses tax target by Sh23b

President William Ruto’s revenue plan is yet to gain momentum as tax collection in the just-ended financial year fell short of the government target by Sh24 billion.

This deals a major blow to the President’s efforts to fund his costly campaign promises and repay mounting public debt at a time his administration’s additional taxes is stoking tensions amid the high cost of living.

The Kenya Revenue Authority (KRA) said yesterday it collected a total of Sh2.166 billion between July 2022 and June 30 this year in taxes, falling short of the target of Sh2.19 trillion that the National Treasury had set for the period.

“The revenue performance was affected by the slowed domestic economic growth in 2022 which went down to 4.8 per cent from 7.6 per cent in 2021,” said KRA acting Commissioner General Rispah Simiyu in a statement yesterday.

“This mirrors the world real GDP (gross domestic product) growth that decelerated to 3.4 per cent in 2022 from a growth of 6.0 per cent in 2021.”

Despite missing its set targets, the collection for the financial year 2022-23 was higher than what was collected in the 2021-22 financial year by Sh135 billion.

“Despite an economic slowdown occasioned by an unfavourable global fiscal environment, KRA recorded a revenue collection of Sh2.166 trillion for the period July 2022 to June 2023 compared to Sh2.031 trillion in the last financial year,” Ms Simiyu said.

KRA has been under pressure from the Ruto administration to seal revenue leaks and boost State coffers to enable Treasury to wean itself off reliance on public debt.

The performance is likely to come under fresh spotlight at a time the government has imposed fresh tax hikes.

They include a doubling of value added tax on fuel to 16 per cent and the introduction of a 1.5 per cent levy to fund affordable housing, which the Ruto government reckons will raise an extra Sh200 billion a year.

The Opposition, however, says the tax hikes will deepen the suffering of Kenyans at a time when many are already struggling with high prices of basic commodities such as maize flour.

KRA said it targets to collect Sh2.768 trillion by the end of the current 2023-24 financial year and hopes to surpass the Sh3 trillion mark by 2025.

It said domestic and customs taxes did not reach their targets due to a tough economic environment.

“During the financial year, domestic taxes registered a revenue growth of 8.5 per cent after collecting Sh1.407 trillion against a target of Sh1.481 trillion,” said Simiyu.

This was a performance rate of 95 per cent.

Customs taxes recorded a performance rate of 95.6 per cent with a collection of Sh754.090 billion. “This translates to revenue growth of 3.5 per cent compared to the same period in FY 2021/2022.”

KRA said despite overall imports increasing by 15.3 per cent, customs taxes performance was in part affected by growth in exemptions and remissions, which grew by 39.7 per cent.