KRA struggles to meet Sh1.07 trillion target amid falling revenues

The Kenya Revenue Authority (KRA) is under pressure to collect Sh1.07 trillion by June, following months of underperformance that have left the taxman struggling to meet its targets.

Between July 2024 and February 2025, KRA collected Sh1.4 trillion, which is 56.7 percent of its annual target of Sh2.475 trillion.

This means it must collect an average of Sh267.8 billion per month from March to June to meet its goal.

However, this appears challenging given that its collections have averaged Sh175.46 billion per month over the past eight months.

In January and February, the figures dropped further to an average of Sh164.8 billion, worsening the situation.

Between July and December 2024, KRA had managed an average monthly collection of Sh179 billion. The authority did not respond to queries regarding the missed targets and its strategy to bridge the deficit.

A report by the Parliamentary Budget Office (PBO) raised concerns over the country’s revenue performance, noting that ordinary revenue as a percentage of GDP has declined over the past three years, falling from 15.1 percent to 14.5 percent.

The report pointed out that various revenue-boosting measures had failed to yield results.

"The revenue heads with the largest reduction include Income Tax, which reduced from 6.9 percent of GDP in the financial year 2021/22 to 6.6 percent in the financial year 2023/24, and excise duty, which reduced from 2 percent to 1.7 percent over the same period," the PBO stated.

The report also observed that KRA’s poor tax collection over the six months to December 2024 meant the government had fallen below its half-year targets, making it harder to achieve the annual revenue goal.

As a result, the government revised its tax revenue projections from the initial Sh2.9 trillion to Sh2.47 trillion due to KRA’s struggles.

Treasury acknowledged these difficulties last month.

"Taking into account the ordinary revenue shortfall to December 2024 of Sh93.2 billion, the additional revenue from the Tax Laws (Amendment) Act 2024 and the Business Laws Amendment Act 2024, the total revenue projections to June 2025 have been revised to Sh3,065.2 billion (17.6 percent of GDP).

Of this, ordinary revenue will be Sh2,580.9 billion (14.8 percent of GDP), down from Sh2,631.4 billion in Supplementary Estimates 1,” it said.

The February Treasury statements confirmed that tax revenue targets had been adjusted to Sh2.47 trillion.

The shortfall in collections has led to delays in cash disbursements by the Treasury to counties and national government agencies, affecting salary payments and project implementation.

With just four months remaining, the KRA faces an enormous task to meet its collection targets, and how it plans to achieve this remains unclear.