KRA surpasses Sh2.555trn revenue target for 2024-25

KENYA Revenue Authority has reported a 6.8 per cent growth in revenue collection for the financial year 2024-25 hitting Sh2.57 trillion, despite a tough economic environment that also came with the  shelving of the Finance Bill 2024.

The taxman surpassed the revenue target of Sh2.555 trillion for the year ended June 30, with a  performance rate of 100.6 per cent, compared with the Sh2.41 trillion collected in the last financial year.

While the withdrawal of the Finance Bill had a negative impact on domestic revenue, which fell short of the Sh1.72 trillion target to close at Sh1.68 trillion (4.8% growth), the authority recorded significant growth in other segments with exchequer revenue growing by 4.5 per cent to Sh2.32 trillion, compared to Sh2.22 trillion collected in the previous financial year.

This translates to a performance rate of 99 per cent against a target of Sh2.34 trillion.

This is despite a tough first half of the year (July-December) which was characterised by numerous economic headwinds with high bank lending rates, global tariffs war, and international conflicts adding up to the shelving of the Finance Bill 2024 following countrywide protest.

In particular, overall import values recorded weak growth of 0.04 per cent affected by drop in import values of fuels and lubricants, and food and beverages which recorded declines of 16.4 per cent and 14.6 per cent, respectively.

Further, export values declined by two per cent especially from horticulture (-2.5%) and tea (-15.4%).

In addition, access to credit by the private sector remained constrained due to higher commercial bank lending rates in the current year compared to the previous year.

“Notwithstanding these challenges, KRA’s robust measures yielded a significant revenue collection turnaround in the second half of the financial year. Revenue grew by 9.1 per cent compared to the 4.5 per cent growth recorded in the first half of the financial year,” Commissioner General Humphrey Wattanga said in a statement on Thursday.

During the year under review, customs revenue recorded a performance rate of 105.9 per cent with a collection of Sh879.329 billion against a target of Sh830.368 billion, translating to a growth of 11.1 per cent compared to the same period in 2023-2024. This, as Kenya remained a net importer mainly from China.

Domestic VAT collection stood at Sh327.3 billion, reflecting a growth of 4.2 per cent compared to the previous year. In the first half of the financial year, KRA collected Sh148.374 billion.

“In the second half of the FY, KRA implemented a raft of VAT compliance initiatives to seal revenue loopholes, enabling the collection of Sh178.962 billion. These initiatives included strict VAT registration controls and verification of declarations,” Wattanga said.

Gamblers gave the taxman a windfall in excise tax which surpassed the target after registering a surplus of  Sh1.95 billion with the tax head collected closing the year at Sh13.23 billion, against a target of Sh11.288 Billion. Betting tax also grew to Sh5.7 billion against a target of Sh5.4 billion.

Taxes from Pay As You Earn (P.A.YE) were Sh560.9 billion after slow growth of 3.3 per cent as formal employment remained constrained by a tough economic environment and reduced hiring by both private sector and government.

KRA has also attributed the slow growth to utilisation of adjustment vouchers by taxpayers to offset tax liabilities and policy impacts, which included adjustment of SHIF and Housing Levy from relief to allowable deductions before tax computation.

Corporation tax collected was Sh304.8 billion against a target of Sh 321.080 billion with most of the revenue coming mainly from ICT, manufacturing, financial, real estate, wholesale and retail sectors.

Domestic excise closed the year at Sh69.38 billion with a decline of revenue remittance from manufacturers of beer and tobacco products by 13.9 per cent and 8.9 per cent, respectively, affecting collections with KRA yesterday saying it will continue to enhance compliance measures in the sector which has continued to be hit by illicit trade and counterfeits.

The authority has a target of Sh2.75 trillion for the 2025-26 financial year expected to help fund the Sh4.3 trillion budget.

To drive continued revenue growth, KRA is implementing a number of measures including a corporate plan focusing on enhancing revenue collection, increasing customer satisfaction, digitalising revenue administration and strengthening human resource management.

KRA has also continued to leverage disruptive technology to enhance efficiency, transparency and effectiveness in revenue collection.

“These innovations are part of KRA's broader digital transformation and tax modernisation strategy to improve compliance, reduce leakages and enhance taxpayer experience,” it said.

Some of these technologies include Electronic Tax Invoice Management System (eTIMS), which has minimized VAT fraud; improved tax compliance; simplified VAT filing and payment process; facilitated tax base expansion and increased tax revenue.