MPs reject KRA bid for bigger share of national revenue

The National Assembly's Finance Committee has rejected a proposal by the Kenya Revenue Authority to increase its share of the national revenue basket, dealing a blow to the taxman's push for additional resources to improve tax collection.

The House team declined KRA's request to raise its budgetary allocation from the current 1.5 per cent of estimated annual revenue collections to at least two per cent.

The proposal had been contained in amendments to the Kenya Revenue Authority Act currently before Parliament and, if approved, would have handed the authority billions of shillings in additional funding every year.

In its report, the Finance and National Planning Committee chaired by Molo MP Kuria Kimani said the request required wider engagement before lawmakers could approve such a significant shift in KRA's funding model.

"The committee noted the stakeholder's proposal but was of the view that the proposal needed further consultation," the MPs said.

The decision means the taxman will continue operating under the existing arrangement under which the authority receives one and a half per cent of the revenue projected in the annual financial estimates to be collected by the agency.

KRA had sought to amend the provision to read: "At least two per cent of the revenue estimated in the financial estimates for each financial year."

The tax authority argued that additional funding was necessary to strengthen its operations and address persistent challenges in meeting revenue collection targets.

The agency has repeatedly fallen short of its collection goals in recent years amid slower economic growth, increased tax resistance from Kenyans, and difficulties in expanding the tax base.

In submissions to the committee, the authority argued that the constitution allows Parliament to authorise a state organ to retain part of the revenue it collects for purposes of financing its operations.

KRA said the proposed changes were intended to modernise the authority's financing structure and align it with constitutional principles governing public finance management.

"The proposal seeks to overhaul the funding model and align KRA financing with Parliamentary appropriations and constitutional principles of public finance management," the authority told MPs.

The taxman further argued that parliamentary appropriation of its funding would strengthen accountability, democratic oversight and alignment with national priorities.

"Parliamentary appropriation enhances accountability, democratic oversight and alignment with national priorities," KRA says in its submissions.

Besides seeking a larger budgetary allocation, the taxman had also proposed the creation of a reserve fund to hold unspent balances from previous financial years.

The authority additionally sought legal backing for employee welfare schemes and transitional provisions to cushion staff and ongoing projects during the transition to the new financing structure.

KRA management argued that the measures were intended to protect staff emoluments and multi-year contractual obligations during the proposed shift.

While lawmakers rejected the proposal for additional funding, they approved the rest of the Bill, which largely seeks to remove obsolete provisions and align the KRA Act with existing legislation and constitutional requirements.

The committee said its decision followed public participation exercises conducted in 13 counties, including Nairobi, Kiambu, Vihiga, Mombasa and Wajir.

Although most participants supported the technical amendments contained in the Bill, concerns were raised over KRA's broad enforcement and investigative powers.

Residents in Wajir called for stronger safeguards to protect taxpayer privacy and urged Parliament to enhance oversight mechanisms over the authority.

Participants in Nairobi acknowledged the taxman’s struggle to meet revenue targets but argued that the agency's extensive powers should be subjected to stricter checks and balances.

In Turkana, residents recommended stronger taxpayer protections and more robust parliamentary oversight, while participants in Mombasa warned against possible conflicts between enforcement measures and citizens' privacy rights.

The committee also adopted technical amendments proposed by the Office of the Attorney General and the Department of Justice.

Among the changes are provisions clarifying the distinction between appointive and ex-officio board members.

The AG also want it stipulated that the KRA board chairperson, who is appointed by the president, should submit resignation directly to the head of state.