KRA needs to collect Sh8b daily to hit Sh2.6tr June target

The taxman is under immense pressure to meet a staggering target of Sh2.684 trillion within the next six months.

This means the Kenya Revenue Authority (KRA) must collect Sh240.17 billion each month, including January, or approximately Sh8 billion daily. 

This ambitious goal highlights the daunting challenge ahead as businesses and ordinary Kenyans grapple with ongoing economic hardships, making the prospect of increased taxation unlikely.

In a statement Tuesday, KRA announced a revenue collection of Sh1.243 trillion as of December 31, 2024, reflecting a modest growth of 4.5 per cent compared to Sh1.189 trillion in the same period the previous year.

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“In spite of the progressive growth, the collection was affected by various economic indicators that directly drive revenue collection,” said the tax authority.

“For instance, GDP growth slowed to 4.0 per cent in the third quarter 2024, down from 6.1 per cent in the third quarter 2023, and 4.6 per cent in the second quarter 2024.”

KRA now says it is pulling all stops to hit its ambitious target by the end of its fiscal year in just under five months.  

“KRA targets to collect Sh2.684 trillion by the end of Financial Year 2024-2025,” said the taxman.

“KRA is confident that it will continue with the upward trajectory and achieve the set target to enable the government to sustain the country’s economy.”

Exchequer revenue, collected on behalf of the National Treasury, amounted to Sh1.120 trillion, while agency revenue for other government entities reached Sh122.872 billion, outperforming the target by 121.3 per cent, KRA said. 

Despite this growth, the KRA said it has faced headwinds from various economic indicators that directly impact revenue collection.

A slowdown in GDP growth to 4.0 per cent in the third quarter of 2024, down from 6.1 per cent in the same quarter of 2023, coupled with low domestic demand—evidenced by a Purchasing Managers Index (PMI) averaging 49.2 points from July to December 2024—has contributed to a challenging environment.

Moreover, the government's austerity measures, aimed at controlling expenditure, have adversely affected key sectors reliant on VATable goods.

Cumulatively, customs revenue collection reached Sh429.127 billion, a growth of 4.8 per cent over Sh409.548 billion in the same period of FY 2023/24. 

Domestic taxes totalled Sh811.847 billion, signifying a 4.4 per cent increase from Sh777.617 billion in the previous July-December period.

The update by KRA comes at a time when public finance experts have proposed radical changes to Kenya’s tax regime to ease compliance and improve the operating environment for businesses.

They want the National Treasury to do away with the annual practice of introducing new taxation measures through the Finance Bill, which, they said, would play part in bringing about predictable taxation.

Among them is Ndiritu Muriithi, the newly appointed Kenya Revenue Authority (KRA) chairman, who noted that the clamour by Kenyans and businesses for a stable and predictable tax environment is a genuine concern.

He cited new tax measures that are introduced by the Finance Act every year as among the factors that disorient businesses and leave them unable to plan for the long term. 

“The need for an annual Finance Bill is a historical thing. I do not see any technical reason why it should be done the way it is done other than the weight of history,” he said.

“(Historically), price adjustments were an annual thing when we had price controls. The Minister for Finance would come to Parliament and explain how prices would change… (some of them effective) from midnight (on the day the budget was read).”

His sentiments, a possible pointer to the direction that the government could be considering taking, come on the background of the rejection of the Finance Bill, 2024 following the countrywide anti-government protests in June.

KRA had collected Sh1.074 trillion in ordinary revenue as of December 31, 2024. Treasury in the draft 2025 Budget Policy Statement noted that all broad tax categories of ordinary revenue fell short of the respective targets. Over 2025-26, Treasury has given KRA a target of Sh3.018 trillion.