Economy
KRA falls below recovery target again, blaming shilling, interest rates
Monday December 11, 2023
The Kenya Revenue Authority (KRA) collected Sh1.03 trillion between July and Friday last week, after November revenue rose 15.8 percent to Sh180.7 billion, compared to a similar month of 2022.
The collections, however, represent a further drop from the KRA’s annual target as it continues to struggle to generate revenue amid a challenging economic environment for Kenyans and businesses.
Between July and November, the taxman collected Sh963.7 billion, or 34.6 per cent of the target of Sh2.787 billion for the 2023/24 financial year. During a similar period last year, the revenue officer collected Sh856.6 billion (40%) of the annual target of Sh2.145 billion.
“Revenue collection has gradually increased over the last five months (July-November 2023/24) after KRA collected Sh963.746 billion compared to Sh856.646 billion collected during the same period of the previous financial year “, which represents a growth of 12.5 percent,” noted Mohammed Omar, KRA commissioner for strategy, innovation and risk management.
Revenue during the period was boosted by taxes on petroleum products which increased by 42.5 percent, partly due to the increase in value added tax (VAT) on these products since July .
This boosted the Authority’s customs revenue, which increased by 17.6 per cent to Sh72.1 billion in November, the second highest monthly customs duty collection in the KRA’s history.
“The good performance is attributed to oil taxes which collected Sh27.943 billion, which translates to a growth rate of 42.5 percent compared to Sh19.610 billion collected during the same period last financial year. The good performance of oil taxes is mainly due to the growth in overall volumes and value of oil of 36.7 percent and 49.5 percent respectively.
“Growth was also driven by the positive impact of tax policy which includes the change in the VAT rate from 8 percent to 16 percent under the 2023 Finance Act,” the KRA said.
The taxman also noted that domestic taxes in November stood at Sh108.2 billion, up 14.7% from Sh94.3 billion in November 2022.
The KRA notes that revenue collection continues to be affected by factors such as the depreciation of the shilling and rising commodity prices, which have reduced demand for imports.
“While the value of imports (in terms of Kenyan shillings) increased by 36 percent and 11 percent in November 2023 and July-November 2023 respectively, in dollar terms the growth for the month was moderate at 9 percent. cent and a decline of 9.2 percent was recorded cumulatively. », noted the Authority.
KRA aims to collect Sh2.787 trillion by June 2024, but collections remained below the target in the first five months of the current financial year. The revenue performance also fell below that of the last financial year, when the Authority also failed to meet its targets, collecting Sh2.04 trillion, against a target of Sh2.145 trillion.
The Authority says the economy has been hit by high interest rates that have reduced banks’ profitability and generally weak consumer purchasing power.
“In particular, weak aggregate demand is also reflected in seemingly slow GDP growth. Tensions on the financial markets marked by an increase in lending rates and interbank rates have slowed down the granting of credit, particularly to the private sector, leading to a drop in the Bank’s profitability of 4.9 percent at the end of September 2023. , we can read.