In the intricate dance of fiscal responsibility, the Kenya Revenue Authority (KRA) finds itself facing a challenging performance trajectory. Despite a commendable 15.8 percent growth in November revenues to Sh180.7 billion, the overall revenue collection of Sh1.03 trillion from July to last week falls short of the annual target. This struggle persists against the backdrop of a challenging economic landscape for both Kenyans and businesses.
Factors Affecting Revenue Collection
The period between July and November saw the taxman collecting Sh963.7 billion, representing 34.6 percent of the Sh2.787 trillion target for the 2023/24 financial year. Comparatively, in the same period last year, the collection stood at Sh856.6 billion, constituting 40 percent of the Sh2.145 trillion annual target. While revenue has shown a positive growth of 12.5 percent, the current collection lags behind the previous year’s performance.
Revenue drivers during this period were largely influenced by a 42.5 percent growth in taxes from petroleum products, attributed in part to the rise in Value Added Tax (VAT) on these products since July. Customs duty, particularly from petroleum, experienced a notable 17.6 percent growth to Sh72.1 billion in November, marking the second-highest monthly collection in KRA’s history.
Domestic taxes also contributed positively, reaching Sh108.2 billion in November, reflecting a growth of 14.7 percent from the same month in 2022. However, the overall economic landscape presents challenges, with factors such as the depreciation of the shilling and escalating commodity prices adversely affecting import demand.
Challenges and Contributing Factors
KRA acknowledges that revenue collection continues to be hampered by the depreciation of the shilling and rising commodity prices, leading to a decrease in import demand. Import values, though growing in Kenyan Shilling terms, face a subdued 9 percent growth in dollar terms, with a cumulative decline of 9.2 percent.
The target of Sh2.787 trillion for the year ending June 2024 seems elusive, as collections persistently fall below the mark. The Authority points to high-interest rates, impacting bank profitability, and a general decline in purchasing power among consumers as key contributors to the economic challenges.