The National Treasury has cut tax projections for the year ending June by Sh516 billion since July 2024, underlining the hurdles the taxman has faced trying to meet an ambitious Sh2.9 trillion target.
In the latest government revenue statement, the Treasury slashed Sh140 billion from the target, leaving the Kenya Revenue Authority (KRA) with the task of collecting just Sh2.4 trillion.
Treasury’s action to lower the tax target for the 2024/25 fiscal year to Sh2.4 trillion came just days after it announced a new target of Sh2.54 trillion early this month.
“The National Treasury has revised its revenue projection downwards from Sh3.018 trillion initially projected in BROP (budget review and outlook paper) 2024 to the projection in DORB (division of revenue bill) 2025 and BPS (budget policy statement) 2025 of Sh2.835 trillion.
“The projection is informed by ordinary revenue projection revisions for financial year 2024/25 from an initial target of Sh2.917 trillion to a baseline of Sh2.54 trillion,” the Treasury said in submissions to Parliament.
Treasury told Parliament’s Budget Committee that the low collections in the current fiscal year risked lowering projections for the year starting July 2025.
The government initially planned to collect Sh2.917 trillion in taxes when it presented the 2024/25 budget in June 2024, but has since reconsidered the ambitious target and lowered it by Sh516 billion. This cut represents 17.7 percent of the original tax target.
The first review came in July 2024, following intense public protests against the Finance Bill, 2024, when the Treasury lowered the target from Sh2.917 trillion to Sh2.63 trillion in the first supplementary budget.
KRA then recorded a streak of below-target collections in the first half of the 2024/25 fiscal year, forcing the Treasury to further lower the target to Sh2.58 trillion in the second supplementary budget in February 2025.
By the end of March 2025, KRA had collected Sh1.579 trillion in taxes, a monthly average of Sh175.49 billion since July.
However, this monthly average has declined from Sh179 billion in December 2024, implying that the taxman’s performance in the last three months has been poor, informing the Treasury’s further action.
KRA noted that the January-March quarter has historically recorded the poorest performance in terms of collections, contributing 22.3 percent to annual taxes in the 2022/23 and 2023/24 fiscal years.
“In the last two years (2022/23 – 2023/24), revenue shares have averaged as follows across the quarters: Q1 (24.7 percent); Q2 (24.8 percent); Q3 (22.3 percent); and Q4 (28.2 percent). Thus, quarter 3 has always had the least collections given the expected lower contributions expected in the months of January and February,” KRA said.
The new target leaves the taxman with a task to collect Sh821.3 billion over the three months to the end of June, averaging Sh273.76 billion monthly.
