KRA collects KSh155 billion revenue in July

The Kenya Revenue Authority recorded an 18.7% jump in revenue collection in July compared to a similar period last year driven by new tax measures and increased economic output.
The National Treasury shows the taxman collected KSh155.06 billion in revenues last month, a sharp growth compared to the KSh130.6 billion that the tax agency collected in July last year.
The July collections have surpassed monthly collections in 6 of the twelve months in the financial year 2022/23, but are a 29.7% drop from the record KSh220.6 billion that was collected in June.
Last month’s revenues were boosted by doubling of value added tax on fuel to 16% which took effect on 1 July. The High Court had temporarily suspended the implementation of the Finance Act, 2023 which doubled the VAT, but the Energy and Petroleum Regulatory Authority still went ahead to effect the tax.
The Court of Appeal has since allowed implementation of the Act, which puts KRA in a race against time to collect a tax revenue target of KSh2.49 trillion in the current financial year.
Mobilizing enough tax revenue through new taxes and expanding the tax base is one of President William Ruto’s main targets to fund his KSh3.67 trillion debut budget. Dr Ruto’s first budget contains a fiscal deficit of KSh718 billion, which is expected to be financed through domestic borrowing of KSh586.5 billion and external loans of KSh131.5 billion.
Besides doubling VAT on fuel, other new taxes in the Act include a 1.5% housing levy that is deducted from the gross pay of all workers and raising turnover tax from 1% to 3%.
Further, workers earning between KSh500,000 and KSh800,000 monthly will be taxed pay-as-you-earn at the rate of 32.5%, while those who earn more than KSh800,000 monthly will pay 35%.
The Ruto administration seeks to raise an additional KSh289 billion from the new tax measures to fund the budget.
National Treasury Cabinet Secretary Prof Njuguna Ndung’u, in disclosures to the International Monetary Fund , has also indicated plans to introduce further taxes in the coming months to raise further revenues.
One of these tax measures includes the introduction of a motor vehicle circulation tax. Countries that have implemented this tax have payment of an annual registration fee for motor vehicle owners to use public roads.
Such a tax would be a heavy blow to motorists at a time they are already paying historically high prices of fuel.
“To ensure that program performance objectives are met, any tax revenue shortfall relative to program targets will be compensated for by taking additional tax policy measures,” said Prof Ndung’u.
The Treasury is also eyeing reducing exemptions of some goods and services from paying value-added tax as well as cutting exemptions on interest paid by the government.
CS Ndung’u said these tax measures would be submitted to Parliament for approval by the end of October this year alongside the first supplementary budget for FY 2023/24.
KRA collected KSh2.17 trillion in tax revenue in FY2022/23, missing it’s target for the financial year by some KSh107 billion. The tax agency cited the prevailing tough economic environment as the reason for missing the target, with traditional outperformers such as customs taxes falling below the target.
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