The National Treasury has cut back tax revenue projections by Sh60 billion in the wake of subsidies introduced this financial year.
Treasury in its latest projection expects Kenya Revenue Authority (KRA) to now raise Sh1.439 trillion, down from Sh1.499 trillion spelled out in the budget.
In the first four months to October, the country’s tax revenue stood at Sh405 billion, an indication the taxman may miss the target for the year.
Treasury Cabinet Secretary Henry Rotich said recently KRA had fallen short of Sh40 billion in the first four months of the 2017/18 (July-June) fiscal year due to a fall in customs duty after the Government allowed importation of sugar, maize, and milk for free to cushion consumers against a sharp rise in inflation.
“We have discussed with KRA on measures of recouping the lost revenue by instituting administrative changes,” he said at press briefing in Nairobi. The CS said KRA would start implementing a new customs management system and phasing out the Simba customs management system that has been losing money.
The taxman will also seek to make better tax valuations and improve shipment inspection while at the same time mining third-party data, which will be linked to bank accounts, Integrated Financial Management Information System (IFMIS) and the Central Bank of Kenya.
The country risks running short of tax revenues, which would mean borrowing more money to plug the budget gap.
According to the latest Treasury projections, the fiscal gap is expected to be bigger at Sh691 billion, which would put it at 7.9 per cent of the GDP, up from Sh535 projected at the beginning of the year.
While ruling out borrowing more money to finance government spending, CS Rotich has also pointed out that the way out would include austerity measures and cutting back on domestically-funded infrastructure projects.
Treasury introduced austerity measures including banning foreign trips, as well as cuts in local trips, training, and hospitality, which went to finance the repeat elections and mitigate the drought effect as well as finance free secondary education.