President William Ruto’s administration will miss tax collection target by Sh300 billion if the current trends are anything to go by, a report has warned.
The report by the Parliamentary Budget Office said Kenya Revenue Authority missed the tax revenue collection target for quarter one of the current financial year by Sh72.5 billion.
The Quarterly Economic and Fiscal Update (July - September 2023) Report noted that overall tax revenue receipts totalled Sh545.3 billion translating to 88.3 per cent performance.
The first quarter target is based on the annual tax revenue target of Sh2.571 trillion for the Financial Year 2023/24.
The report said revenue collection grew by 7.9 per cent from the previous year, a drop compared to an average of 13 per cent growth in previous years.
It said the drop may be attributable to the delay in implementing the revenue-raising measures contained in the Finance Act of 2023.
“However, if the performance rate follows the same trend for the rest of the fiscal year, then the annual target is likely to be missed by approximately Sh300 billion,” the report stated.
The report further noted that all tax revenue categories recorded below-target performance during the period under review.
“Specifically, income tax missed its projections by Sh35.5 billion mainly due to below-target collection of taxes from employment income-PAYE,” it said.
It added that consumption-based taxes fell short by Sh33.4 billion as such VAT, Excise duty, and import duty missed the target by Sh12.6 billion, Sh12.5 billion, and Sh8.4 billion respectively.
“Despite the shortfall, all revenue categories registered growth from the previous year except import duty, which declined by 1.6 per cent on the backdrop of shrinking imports.”
The document noted that the public debt stock stood at Sh10.52 trillion as of the end of August 2023.
It said the debt consisted of Sh4.81 trillion and Sh5.71 trillion in domestic and external debt respectively.
“This was driven by a Sh1.62 trillion increase in public debt between June 2022 and June 2023, the highest increase in Kenya's public debt on record. Domestic debt stock increased by Sh503.02 billion while external debt increased by Sh1.12 trillion partly due to the impact of the exchange rate on both new borrowing and external debt stock,” the report explained.
It added that banking institutions continue to be the government's main creditors, owning 45 per cent of government securities on average, followed by pension funds at 32 per cent.