Revenue mobilization for the financial year 2023/2024 grew by a notable 11.1% up from 6.4 % in the previous financial year, after KRA collected Kshs. 2.407 Trillion compared to Kshs. 2.166 Trillion in the previous financial year. This translates to a performance rate of 95.5% against the target.
The year under review was characterized by multiple economic shocks that included depreciation of the Kenya Shilling against the US Dollar, rising bank lending rates and international conflicts that disrupted supply chains, among others. These factors affected revenue mobilization efforts.
The Exchequer revenue grew by 9.5% after KRA collected Kshs. 2.223 Trillion compared to Kshs. 2.030 Trillion collected in the previous financial year. This translates to a performance rate of 95.8%.
Additionally, KRA collects revenue on behalf of other government agencies, mainly at the ports of entry. These include Road Maintenance Levy, Air Passenger Service Charge, Aviation Revenue, Petroleum Development Fund, Petroleum Regulatory Levy, Housing Levy, amongst others. During the financial year ending 30th June, 2024, KRA collected agency revenues amounting to Kshs. 184.036 Billion, reflecting a growth of 34.9% compared to the last financial year.
Economic Environment
The revenue performance reflects the prevailing economic indicators, especially the GDP growth of 5.6% in 2023 calendar year (Economic Survey 2024), compared to a growth of 4.9% in 2022.
The overall inflation rate averaged at 6.86% in the first half of FY 2023/24, mainly driven by elevated prices of commodities due to high fuel and energy prices. However, inflation eased to an average of 6.29% in the third quarter and further down to 4.87% in the fourth quarter of FY 2023/2024. This was attributed to the monetary policy deployed by the Central Bank of Kenya. In summary, inflation averaged at 6.22% in FY 2023/24, compared to an average of 8.78% in FY 2022/2023.
Customs and Domestic Taxes Performance
During the financial year, Domestic Taxes registered a revenue growth of 14.4% after collecting Kshs. 1.611 Trillion against a target of Kshs. 1.677 Trillion. This translates to a performance rate of 96.1%.
Customs Revenue recorded a performance rate of 94.6% with a collection of Kshs. 791.368 Billion. This translates to a revenue growth of 4.9%, compared to the same period in FY 2022/2023.
Despite overall import values increasing by 11.7%, oil and non-oil taxes performance were in part affected by growth in exemption and remissions, which grew by 23.8%, driven by special exemptions accorded to some food commodities. These products account for 40.8% of exemptions accorded in the FY 2022/2023. The special exemptions were part of the government’s strategies to mitigate against adverse effects of drought and reduce the cost of living. Further, there was low consumption of petroleum products in the country, especially diesel and petrol, which was in part exacerbated by high retail prices for the better part of the year in focus.
Performance of Key Tax Heads
Domestic VAT: Domestic VAT collection stood at Kshs. 314.157 Billion against a target of Kshs. 307.823 Billion, reflecting a growth of 15.3% compared to the previous year. Domestic VAT collections surpassed target by Kshs. 6.334 Billion. The growth is attributed to the implementation of the Electronic Tax Invoice Management System (eTIMS), which has enhanced compliance among VAT-registered taxpayers.
It is important to note that Domestic VAT average monthly collection growth scaled up to 17.5% in the year under review. The monthly average collection stood at Kshs. 26.250 Billion in the second half of FY 2022/23, after introduction of eTIMS, against the monthly average collection of Kshs. 23.599 Billion collected in the first half of FY 2022/23, before rollout of eTIMS. Currently, monthly average Domestic VAT collections stand at Kshs. 28.680 Billion in FY 2023/24.
Capital Gains Tax: Capital Gains Tax registered a 49.5% growth after collecting Kshs. 8.381 Billion against a target of Kshs. 7.710 Billion. This signifies a performance rate of 108.7%, after collecting a surplus of Kshs. 671 Million.
Corporation Tax: Corporation tax performed at 93.4% with a collection of Kshs. 278.156 Billion. This is a growth of 4.9% over the last financial year. This performance was driven by increased remittances from sectors like: Wholesale & Retail Trade (10.0%); Electricity, Oil, & Gas (11.0%); Transport & Storage (118.5%); Accommodation & Food Service (96.6%); Education (29.5%); among others. These sectors contributed 20.5% of the Corporation taxes.
On the downside key sectors like Finance & Insurance, Information & Communication, and Manufacturing experienced declines in instalment remittances of 2.4%, 12.3%, and 13.0% respectively. This is attributed to reduced profitability reported by taxpayers across these sectors, explained by:
- Increase in provisioning for non-performing loans in the banking sector that spiked as a result of high default rates.
- Forex losses arising from a depreciated exchange rate especially in the first half of FY 2023/24.
- Weak demand for manufactured goods affected by high retail prices that was a result of high cost of inputs (mainly import driven), high energy costs, etc.
Pay As You Earn (P.A.YE): P.A.Y.E registered a growth of 9.7% after collecting Kshs. 543.186 Billion. The performance was mainly driven by remittances from private firms and public sector, which grew by 13.4% and 3.7% respectively.
Domestic Excise: The tax head recorded a growth of 8.1% in FY 2023/24, with a collection of Kshs. 73.624 Billion, which translates to a performance rate of 99.6%. The performance is attributed to the growth in revenue from: manufacturers of; soft drinks (12.2%); bottled Water (9.7%); beer (16.2%); and Tobacco (1.9%). KRA continues to enhance surveillance in the sector to ensure compliance.
Customs Revenue: Non-Oil taxes recorded a growth of 1.9% after collecting Kshs.490.60 Billion. On the other hand, Oil taxes grew by 10.3% after collecting Kshs. 300.77 Billion.
Key Revenue Drivers
The revenue growth is attributed to implementation of key strategies as enshrined in KRA’s 8th Corporate Plan. Some of these strategies include:
Technology: KRA has continued to leverage disruptive technology to deliver tools that enable market customized solutions. These solutions have highly simplified tax processes, facilitated trade and enhanced voluntary compliance.
Going into the future, KRA projects to design and deploy new technology architecture that will create market customized solutions by enabling other stakeholders to integrate with KRA systems. KRA will increasingly rely on data analytics, Artificial Intelligence (AI), Machine Learning (ML) and Application Programming Interface (API).
These technologies will reshape how KRA approaches compliance by modernising tax processes. The technologies will help improve customer experience, service quality, identify potential tax evasion schemes, and help KRA make informed decisions and formulate data-driven policies.
Tax Base Expansion: This aims to on-board taxpayers previously not paying taxes. The program enabled KRA to collect Kshs. 24.62 Billion in revenue. Some of the initiatives under the TBE include recruitment of landlords under the Monthly Rental Income (MRI) programme through a taxpayer mapping process (Block Management System - BMS). Through the programme, KRA recruited 1,247,543 additional active taxpayers in the period under review.
Tax at Source: Through this programme, KRA was able to integrate with other systems, allowing for an almost real-time collection of information and revenue directly at the source. Some of the initiatives under this programme that KRA has implemented include:
- Electronic Tax Invoice Management System (eTIMS) which has minimised VAT fraud and increased tax revenue. A total of 280,663 VAT-registered taxpayers onboarded, which led to remittances of 314.157 Billion.
- Integration of Betting and Gaming Companies into KRA tax system. The integration has given KRA real-time access to companies in the gaming and betting sector. The sector registered a growth rate of 2% after KRA collected Kshs. 24.269 Billion in FY 2023/24 compared to Kshs. 19.224 Billion in the previous year from Excise on Betting Services, Withholding tax on winnings from betting and gaming, and Betting tax. The collections were from 111 taxpayers that have been on-boarded. The performance is attributed to the integration of the betting companies into the KRA tax system, which has streamlined tax remittances.
Debt Collection Initiatives: KRA enhanced collection from debt programmes on non-compliant taxpayers, collecting a total of Kshs. 103.390 Billion in FY 2023/2024. This performance is attributable to follow-ups on demand notices and the debt instalment plans agreed upon with taxpayers.
Tax Amnesty: The programme collected Kshs. 43.9 Billion after 2,617,111 taxpayers were granted amnesty in the Financial Year 2023/2024.
Trade Facilitation: Customs achieved a 40.55% uptake on pre-arrival processing, surpassing the 40% target. This achievement underscores KRA’s commitment to efficiency and effectiveness in service delivery. Additionally, the formulation of joint Service Level Agreement (SLAs) for sea clearance cargo among Partner Government Agencies (PGAs) promises to streamline clearance processes, eliminating bottlenecks and enhancing trade facilitation.
Dispute Resolution Framework: The framework enhanced revenue collection from Alternative Dispute Resolution (ADR), which facilitated the release of Kshs. 21.9 Billion for collection from 1,184 concluded cases.
Anti-Corruption Measures: KRA has implemented an anonymous whistle-blowing mechanism through which the public and staff can report tax malpractices. For the period under review, 883 cases were reported through the iWhistle system. This led to recovery of Kshs. 4.22 Billion. During the same period, 255 staff were investigated, 41 lifestyle audits conducted and 2,100 background checks completed.
Customer Support Programmes: These programmes aim to create a customer-centric tax environment to enhance voluntary compliance and improve revenue collection. In FY 2023/24, KRA held 107 sensitizations, 33 engagements with different sectors and eight (8) roundtables. KRA also partnered with Kenya Institute of Curriculum Development (KICD) to incorporate tax content in the Curriculum for pupils in grade four (4) to nine (9). KRA also collaborated with AKILI Kids to launch an animated television series on taxation.
Conclusion
To enhance revenue mobilization and improve efficiency, KRA will implement the 9th Corporate Plan following the end of the 8th Corporate Plan cycle on 30th June, 2024. As opposed to the previous Corporate Plans whose life cycle was three years, the 9th Corporate Plan will be implemented over a period of five years. Over this period, KRA will focus on enhancing tax and Customs compliance through simplification of processes; tax base expansion; scaling up infrastructure to meet business demands; enhancing data management maturity; optimizing human resource capacity and capability, among others. KRA is also implementing the National Tax Policy and the Medium-Term Revenue Strategy (MTRS) for the period FY 2024/25 - 2026/27. KRA’s role is to collect, assess, and account for all revenues on behalf of the national government, as well as administering tax and Customs laws.
Despite the challenging economic environment, taxpayers exhibited resilience and voluntarily paid their taxes to support the country’s economic transformation. As at 30th June, 2024, a total of 8,046,029 tax returns were filed, against a target of 7,187,932. This represents a growth of 26% compared to 6,385,523 tax returns filed last year.
On behalf of the KRA Board of Directors and staff, I appreciate all compliant taxpayers for honouring their tax obligations and their contribution towards furthering Kenya’s economic sustainability through registration, filing, accurate reporting and paying their taxes.
KRA is committed to enhancing taxpayer experience by simplifying tax payment processes and ensuring a positive experience. Additionally, KRA emphasizes its unwavering dedication to upholding integrity and professionalism in all interactions with taxpayers.
COMMISSIONER GENERAL, KRA
PRESS RELEASE 08/07/2024
