KRA on the spot for owing Sh9.5b pending bills to suppliers

Kenya Revenue Authority (KRA) is now pushing for its annual budget allocations to be secured at a minimum of 2 percent of its revenue targets every financial year.

At the same time, KRA is drowning in debt as it owes Sh9.4 billion in pending bills to suppliers.

KRA Commissioner General Humphrey Wattanga told members of a National Assembly House team that its current budget allocation of Sh24.8 billion was insufficient to enable it execute its mandate and that staff would bear the brunt as it would not be able to meet costs and operational requirements for the full financial year. He explained that the Authority is grappling with a projected deficit of Sh12.4 billion, which comprises Sh10.5 billion in recurrent expenditure and Sh1.9 billion for development.

Members of the Finance and national planning committee heard that despite a sustained plea to Treasury to increase the taxman’s funding, no results have been forthcoming.

“The Authority has severally submitted proposals on KRA funding for consideration in the Finance Bill to fix the funding in the KRA Act at a minimum rate of 2 percent of Revenue Targets. The proposal has however not been approved despite the justification presented,” submitted Wattanga.

The taxman faulted Treasury for the inadequate allocation noting that the delayed disbursements of funds had led to its inability to clear pending bills.

Out of the Sh9.45 billion KRA owes, Sh4.98 billion accounts for the pending bills while Sh4.47 billion is attributed to the Excisable Goods Management System debt. The bulk of the pending bills are owed to  a Swiss multinational security printer, Sicpa SA, for the supply of excise duty stamps.

KRA awarded Sicpa SA a contract for the supply of excisable stamps on a range of consumer products, including soda, bottled water, fresh juice, beer, spirits, cosmetics and cigarettes. Under the multi-billion deal, Sicpa is mandated with printing of stamps and provision of technology to detect fake stamps.

Other past due bills include Sh1.2 billion owed to staff medical service providers, Sh867.7 million for electronic seals maintenance (RECTS), Sh792 million for ICT system licenses and maintenance, Sh522 million for office rental leases, Sh796 million for scanner leasing and maintenance contracts, Sh173.9 million for insurance expenses.

The Authority owes a further Sh183.2 million for motor vehicle running, leasing, and repairs, and Sh424.1 million for utilities and general supplies.

Compounding the taxman’s woes  is a further decision by the Treasury to reduce its requested budget for the 2024/2025 financial year by 32.5 billion.

 “As stated, the initial budget allocation to KRA of Sh24.8 billion was inadequate to support staff costs and operations for the full financial year with a projected deficit of Sh12.4 billion. This is against the KRA ideal requirements submitted earlier for funding of Sh 57.3 billion. The deficit in funding was Sh32.5 billion.”

At the same time, documents submitted by KRA indicate that a non-disbursement of Sh7.1 billion of the allocated budget funds for the 2022-23 financial year (including Sh2 billion for EGMS Debt) was not disbursed leading to an increase in Pending Bills.

“In that 2022-23 financial year there was a budget funding allocation of Sh2 billion for the partial settlement of EGMS Debt which was not disbursed. The Authority has prioritised part of the amount in the current financial years additional funding,” said Wattanga.

KRA is now calling for Parliament’s urgent intervention to secure an additional funding of Sh35 billion to “ascertain business continuity in the financial year 2024/25.”