KRA misses tax targets by Sh27bn in Ruto presidency

Times Tower in Nairobi, the headquarters of Kenya Revenue Authority. FILE PHOTO | DENNIS ONSONGO | NMG

By CONSTANT MUNDA More by this Author

Kenya Revenue Authority (KRA) missed its revenue collection targets by Sh27 billion in three months to December amid President William Ruto’s aggressive push to weed out tax evaders and boost receipts.

Tax collections from five major streams—payroll, corporation, VAT, excise and import duty — in the three months to December amounted to Sh466.46 billion against a target of Sh493.11 billion.

Other revenues including investment, fines, levies and forfeitures trailed its target by Sh6.16 billion with a collection of Sh33.10 billion in the quarter.

The Treasury plans to increase tax collection by Sh274.1 billion, or 14.29 percent, to Sh2.19 trillion in the current fiscal year ending June and cut borrowing.

Dr Ruto is targeting tax cheats by partly linking KRA’s tax collection system to mobile financial platforms to catch those who do not pay tax on their incomes.

His administration is also seeking more consumption taxes and ensuring that property owners are paying their fair share.

The 6.16 percent underperformance in core revenues came on the back of sky-high inflation and reduced economic activities that have squeezed household budgets, weakened consumers’ purchasing power and hurt tax collections.

The collections in the quarter, however, represent a growth of 8.44 percent over the Sh460.67 billion the taxman netted in a similar period a year earlier.

In the same quarter of the previous year, the ordinary revenue outperformed the target by Sh20.51 billion or 4.66 percent.

Read: Treasury raises tax goal for KRA by Sh33 billion

Dr Ruto has directed KRA to “collect every shilling due” regardless of the powers wielded by persons or companies from whom payment is due.

This has prompted the opposition to the nickname Dr Ruto “Zakayo” — Swahili for biblical Zacchaeus who was a chief tax collector at Jericho.

The Treasury data shows collection from all major taxation categories underperformed the targets in the second quarter that ended December despite posting growth over the same period last year.

Taxes on profit made by companies, co-operatives and trusts — paid quarterly— fell short of the target by 8.2 percent, or Sh10.15 billion, in the three-month period through December to Sh122.90 billion.

It was followed by value-added tax (VAT) collections which were 5.74 percent short of the Sh140.48 billion goal despite KRA starting the phased rollout of digital electronic tax registers (ETRs) last November, ensuring the real-time transmission of data on sales.

KRA collected Sh67.36 billion in excise taxes, which was 4.83 percent below Sh70.78 billion target for the period, while import duty receipts underperformed Sh34.86 billion target by 3.79 percent in the three-month period.

Deductions from workers’ pay, on the other hand, fell short of the Sh124.1 billion goal by 2.98 percent.

Overall, ordinary revenue for the first half to December was below the target by 4.2 percent, or Sh43.17 billion, with a collection of Sh1.028 trillion.

Njuguna Ndung’u, the Treasury Cabinet secretary, is optimistic about a recovery for the period between January and June.

“Revenue performance is expected to pick up in the second half of FY 2022/23 to reflect improvement in the business environment, tax policy measures and enhanced revenue administration by the Kenya Revenue Authority,” Prof Ndung’u wrote in the 2023 Budget Policy Statement.

The KRA has over the years come under fire from business leaders who have over the years complained of a regime that is largely unpredictable and one that over-burdens a few persons and firms in the formal sector with increased taxes.

The new administration has said it will be looking at a tax policy where the super-rich contribute the highest revenue to the government followed by consumption ahead of salaries and sales made by traders.

Dr Ruto insists KRA has the potential to raise Sh3 trillion in ordinary revenue this financial year ending June 2023, Sh538 billion more than the Sh2.14 trillion target set by the previous administration.

Read: How individuals and companies avoid paying taxes

“It is not an accident that revenue mobilization, though improving, remains far below its potential. Taxpayer apathy is rife,” Dr Ruto said on October 28.

“Potential and actual taxpayers are terrified of Kenya Revenue Authority and even traumatised by the sight of its officials.”

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