The government has lowered its tax collection projections for the year ending June 2025 by Sh40 billion, signalling tough times ahead for the taxman amid a streak of missed targets over the past nine months.
The National Treasury now projects to collect Sh2.54 trillion, down from the Sh2.58 trillion projected in the second supplementary budget.
This is the third revision of projected ordinary revenue for the government, even as the Kenya Revenue Authority (KRA) struggles to meet targets for several tax heads.
In submissions to the National Assembly’s Budget and Appropriations Committee, Treasury noted that below-target tax collections for the current fiscal year have also informed the lowering of projections for the coming fiscal year.
“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 the financial year 2024/25 from an initial target of Sh2.917 trillion to a baseline of Sh2.54 trillion,” Treasury said.
In the April 1 report by the committee, Treasury disclosed the tax revisions to defend its proposal that counties get Sh405 billion in the equitable share of revenues for the 2025/26 fiscal year.
“Ordinary revenue performance in the financial year 2024/25 is likely to result in lower ordinary revenue projected for 2025/26,” Treasury said.
Treasury initially projected to collect Sh2.9 trillion in taxes during the current fiscal year, but this was lowered to Sh2.63 trillion in the first supplementary budget published in July 2024.
Treasury then lowered the target by Sh50 billion to Sh2.58 trillion in the second supplementary budget, citing a series of shortfalls between July and December 2024.
In the 2025 budget policy statement, the Treasury noted that a Sh93.2 billion tax revenue shortfall over the six months to December 2024 had informed the lowering of tax projections for the current fiscal year from Sh2.63 trillion to Sh2.58 trillion.
“Taking into account the ordinary revenue shortfall to December 2024 of Sh93.2 billion, the additional revenue from the Tax Laws (Amendment) Act 2024 and the Business Laws Amendment Act, 2024, the total revenue projections to June 2025 has been revised to Sh3.065 trillion (17.6 percent of GDP),” it said.
The latest reports from the KRA show that in the eight months to February, the taxman collected Sh1.624 trillion out of the new target of Sh2.54 trillion.
This leaves KRA with Sh917.8 billion to collect in just four months to the end of June. Had the tax projections not been revised from the original Sh2.917 trillion, the taxman would be facing an uphill task to collect Sh1.29 trillion in the four months.
“There has been mixed performance noted across various tax heads in the eight months to the end of February 2025. For instance, while oil taxes collection of Sh224.934 billion was above target with a performance rate of 101.2 percent, non-oil taxes realised collection of Sh349.614 billion, translating to a performance rate of 92.7 percent and a growth of four percent over collections in the same period of financial year 2023/24,” KRA said.
Treasury told the budget committee that a decline in economic performance in the first half of 2024/25 was caused by domestic and external shocks.
