Despite facing economic shocks and declines from some key indicators, Kenya Revenue Authority (KRA) has hit the one trillion mark after collecting Ksh 1.030 Trillion as at 8th December, 2023. The Authority has maintained an upward trajectory in revenue collection, after recording a 15.8% growth in the month of November. This is after KRA collected Kshs 180.714 Billion up from Kshs 156.095 Billion collected in November 2022. Revenue collection has progressively increased in the last 5 months (July –November 2023/24) after KRA collected Kshs 963.746 Billion compared to Kshs 856.646 Billion collected in the same period last financial year, representing a growth of 12.5%.
In spite of the progressive growth, the collection was affected by performance of key economic indicators that directly drive revenue collection. These key indicators that significantly impact on revenue performance have generally moved contrary to expectations, with adverse impact on revenue mobilization.
Key among these indicators is the significant depreciation of the Kenya shilling against the US dollar by 24.7% in November 2023 and 22.0% in July – November 2023. This, coupled with increasing prices of key products like oil has an effect of driving down import demand. While import values (in Kenya Shilling terms) grew by 36.0% and 11.0% in November 2023 and July – November 2023 respectively, in dollar terms, the growth for the month was subdued to 9.0%, and a decline of 9.2% recorded cumulatively.
Revenue performance was also affected by low domestic demand as indicated by the slowed Purchasing Managers Index (PMI) that averaged at 47.18 points in July – November 2023 down from 48.66 points in July – November 2022. In particular, depressed aggregate demand is also noted in seemingly slow GDP growth. The tight financial markets marked by increase in lending rates and interbank rates, has slowed down credit extension, especially to the private sector, resulting into decline in Bank profitability by 4.9% as at September 2023.
In a remarkable achievement, Customs recorded the second highest monthly collection in the history of KRA. Customs revenue collections amounted to Kshs 72.116 Billion equivalent to a growth of 17.6% over Kshs 61.322 Billion realized in November 2022.
The good performance is attributed to oil taxes that collected Kshs 27.943 Billion, translating to a growth rate of 42.5% over Kshs 19.610 Billion collected in the same period in the last financial year. The good performance by oil taxes was mainly driven by growth in both overall oil volumes and values by 36.7% and 49.5% respectively. The growth was also driven by positive impact of tax policy which include the VAT rate change from 8% to 16% vide Finance Act 2023.
Domestic taxes amounted to Kshs 108.174 Billion in November 2023, translating to a revenue grew of 14.7% over Kshs 94.331 Billion realized in November 2022.
KRA targets to collect 2.787 Trillion by the end of Financial Year 2023/2024. KRA is confident that it will continue with the upward trajectory and achieve the set target to enable the government sustain the country’s economy.