Ruto push for more tax revenue suffers a major after a shortfall in the first quarter with a KSh13.9bn dip
President William Ruto’s aggressive revenue mobilization plan suffered an early blow after the Kenya Revenue Authority’s consumption and income tax collections for the first quarter of the year fell by Sh13.9 billion short of the goal.
According to preliminary figures issued by the Treasury on Thursday, KRA received Sh459.5 billion from employee and business profits as well as consumption levies, which include excise duty, value-added tax (VAT), and import duty.
The Sh473.2 billion tax target set by the Treasury for the three-month period ending in September 2022 was missed by 2.94 percent, or Sh13.9 billion.
The underperformance is expected to increase pressure on the taxman given that under the previous administration, tax revenue targets were exceeded by more than Sh140 billion annually and surplus collections were reported.
Ruto, who entered office in September, has made it plain that a “strong revenue growth rate and a well-managed budget deficit” are necessary for the “rapid and inclusive socio-economic change” of the country to take place.
“Ruto has said tax compliance will be key in funding programmes aimed at empowering economically underprivileged groups through what he calls the “bottom-up economic model”.
The underperformance in tax receipts, according to Treasury Cabinet Secretary Njuguna Ndung’u, reflects the slowdown in economic activity brought on by the drought and continuous global supply chain disruptions.
“Tax revenue is very much dependent on the economic activity because you are taxing economic activity,” Prof Ndung’u said.
President Ruto reckons there is “evidence of tremendous scope” to expand the active taxpayer base from slightly more than seven million in a country of more than 22 million voters.
He said that the KRA has the potential to raise Sh3 trillion in ordinary revenue this financial year ending June 2023, Sh538 billion more than the Sh2.46 trillion target set by the previous administration.