Tax revenues dip in first quarter to stand at Ksh551B
By John Otini, November 11, 2022Tax revenues in the first quarter of the current financial year from June to September fell short of the target by six per cent to settle at Sh551 billion.
National Treasury Cabinet Secretary (CS) Njuguna Ndung’u attributed the shortfall to a 17 per cent drop equivalent to Sh8.8 billion registered in ministerial income.
Njuguna was speaking yesterday at the launch of this year’s budget preparation process for the FY 2023/24 and the Medium-Term Budget at the Kenyatta International Convention Centre (KICC). This process is expected to inform changes that will align the budget with the new government’s development agenda.
Income shortfall
“The below target performance was on account of a shortfall registered in the ministerial income of Sh8.8 billion, while ordinary revenues registered a surplus of Sh2.6 billion,” Njuguna said.
Ndungu, however, said the revenues were up 9 per cent this financial year compared to the prior period, buoyed by import duty which rose 26 per cent to Sh33 billion up from Sh27 billion and income tax that is not Pay As You Earn (PAYE) which increased by 25 per cent to Sh116 billion from Sh85 billion the previous year.
Non-PAYE income tax includes business or corporation taxes, rent taxes, dividend taxes, pension income and others such as digital marketplaces.
“Budget execution for the year 2022/23 went smoothly to the end of September 2022, albeit with a shortfall in revenue collection of Sh6.2 billion. Revenues increased by 9 per cent compared with a growth of 4 per cent in a similar period in 2021,” Ndungu said.
Presidential directive
The Kenya Revenue Authority (KRA) has been instructed by President William Ruto to raise Sh3 trillion in revenue during the current fiscal year while aiming to treble the collections in the next five years in order to improve the country’s tax to Gross Domestic Product (GDP) ratio. KRA reported a Sh2.03 trillion profit for the fiscal year 2021/ 2022.
The tax-to-GDP ratio is used as a measure of how well the government controls a country’s economic resources.
“We ought to be able to get enough cash. Our GDP has increased by Sh12 trillion, while KRA’s revenue growth in the year was just approximately 14 per cent of GDP. In the past, KRA was successful in raising 18 per cent of GDP. We would have raised an additional Sh400 billion if we met our goal today. If so, I anticipate KRA to get Sh3 trillion in the upcoming fiscal year,” President Ruto remarked.
Speaking during the annual KRA Tax Payers Day last month, the head of state said his administration is prepared to make significant reforms at the KRA in order to ensure the effectiveness and efficiency of tax collection.
The President gave his administration’s commitment to implement radical changes at the KRA to ensure efficiency and effectiveness in tax collection in order to reverse what he referred to as an “unsatisfactory state of affairs,” in reference to harassment by KRA as a means of tax administration.