What you need to know:
- The government has set a target to collect Sh2.07 trillion in tax revenue by the end of the financial year, up from a target of Sh1.7 trillion for last year.
The Kenya Revenue Authority (KRA) increased its revenue collection by seven percent last month compared to July last year, marking a positive start for the taxman’s efforts to collect more revenues to fund this year’s budget.
Data from the National Treasury shows that KRA collected Sh130.6 billion tax revenue in the first month of the financial year 2022/23-- a Sh8.76 billion increase from the Sh121.8 billion it collected in July last year.
The increased tax revenue collection comes after enactment of the Finance Act, 2022, which instituted a raft of tax changes in a delicate balancing act by the Treasury to, on one hand, ease the taxation burden on individuals and businesses and on the other raise enough revenue to fund the budget.
The government has set a target to collect Sh2.07 trillion in tax revenue by the end of the financial year up from a target of Sh1.7 trillion for last year in a bid to fund the Sh3.3 trillion budget and reduce the budget deficit to lessen pressure on borrowing.
The Act raised excise duty on products such as fruit juices, cosmetics, beer, wines, spirits, and cigarettes. Excise duty on imported sugar confectionery, plastics, jewelry, chocolate, and nicotine products was also raised.
Income tax from individuals and corporations is the single largest source of tax revenue for KRA contributing to Sh876 billion of the Sh2.2 trillion the taxman collected during the financial year 2021/22.
Data from the National Treasury shows the KRA collected Sh543 billion in value-added tax (VAT), Sh118 billion from import duty, and Sh252 billion from excise duty.
This year’s budget has a deficit of Sh846 billion that will be financed by a mix of domestic and external borrowing which is set to further raise the debt burden.
The recovering economy has however increased consumption and led to the creation of new jobs giving the KRA a helping hand in raising tax revenue collection despite the economic jitters caused by last week’s polls.
Kenya’s economy grew 7.5 percent last year - the fastest pace in 11 years – driven by the easing of the Covid-19 pandemic restrictions leading to a recovery in the key sectors of the economy including manufacturing, trade, construction, transport, hospitality, and tourism.