- Measures included in the Finance Act of 2023 are expected to be the main drivers of accelerated growth in revenue collection.
- Litigation has been identified as a threat to the ambitious revenue collection targets.
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The National Treasury has set a total revenue target of Sh2.9 trillion in the 2023/24 Financial Year, a report of the Parliamentary Budget Office shows.
The figure represents 18.3 per cent of GDP, which is compared to Sh2. 3 trillion (or 16.3 per cent of GDP) collected during the 2022/23 Financial Year.
“The raft of revenue enhancement measures included in the Finance Act of 2023 are expected to be the main drivers of the accelerated growth in revenue collection,” the report says.
The report was quick to point out that if some of the tax measures contained in the Finance Act of 2023 are affected by lawsuits, the ambitious revenue collection targets may not be met.
The report adds that income tax collection, which accounts for around 46 per cent of ordinary revenue is one of the main targets for curbing the decline in collection as a share of GDP.
“To achieve the projected collection of Sh1.1 trillion from income tax in FY 2022/23, the Finance Act 2023 included measures aimed at expanding the tax base through enhanced collection from income earned in the digital marketplace and the informal economy,” the report adds.
The report says several measures are being put in place in an attempt to address the deteriorating revenue collection as a share of economic output in the current financial year.
“Some administrative measures such as rolling out the electronic Tax Invoice Management System (eTIMIS), Integration of KRA tax system with Telecommunication companies, mapping of rental properties and enhanced compliance through hampering the prevalence of counterfeit excisable products stamps are set to be implemented,” it said.
It further adds that the Act has included clauses on taxation of income drawn from digital content monetisation, limiting the deduction of foreign exchange losses, change of the threshold and rate for turnover tax, taxation of digital assets, enforcement of the use of Electronic Tax Invoice Management System, expansion of the PAYE Bands and withholding tax on advertising.