Government revises tax revenue target downward by Sh105 billion
Initially set at Sh174.6 billion, the expected revenue for the Financial Year 2024-2025 has now been revised downward to Sh70 billion.
The government has reduced its projected additional revenue from newly amended tax and business laws by Sh104.6 billion.
Initially set at Sh174.6 billion, the expected revenue for the Financial Year 2024-2025 has now been revised downward to Sh70 billion.
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Treasury Principal Secretary (PS) Chris Kiptoo attributed the revision to underperformance in revenue collection.
"We have implemented the budget, and we ended up in January this year (2025) with under-performance in revenue of about Sh92.6 billion. Revenues have not done as much as we would have wanted. We have just submitted Supplementary II to Parliament. It takes into account tax measures that we took to Parliament late last year," Kiptoo said during an economic and sustainability forum organized by Diamond Trust Bank.
He explained that some of the proposed tax measures were not approved by Parliament, reducing the anticipated revenue.
"We were expecting to raise about Sh175 billion, but Parliament did not approve all measures. When we estimate, we anticipate revenues of about Sh70 billion," he added.
The revised tax measures are contained in the Tax Laws (Amendment) Act 2024, the Tax Procedures (Amendment) Act 2024, and the Business Laws (Amendment) Act 2024.
These amendments are aimed at expanding revenue streams through changes to the Income Tax Act, the Value Added Tax (VAT) Act, the Excise Duty Act, the Miscellaneous Fees and Levies Act, and the Tax Procedures Act.
Tax amnesty
Some of the key revenue-generating measures include the extension of the tax amnesty and higher excise taxes on alcohol, cigarettes, and telecommunications services such as telephone and data usage.
Despite these efforts, revenue collection for the first six months of the current financial year fell short of expectations.
Total revenue stood at Sh1.37 trillion, missing the target of Sh62.8 billion. The main shortfall came from VAT, which collected Sh304.08 billion, Sh36.51 billion below target. Pay-As-You-Earn (PAYE) was another major contributor to the revenue gap, raising Sh275.9 billion, which was Sh21.33 billion less than projected.
"By the end of January 2025, revenue collection was below target by Sh92.6 billion, mainly due to a shortfall in ordinary revenues of Sh113.0 billion, while Ministerial Appropriation-in-Aid surpassed the target by Sh20.3 billion," Kiptoo said.
The government has now proposed a Supplementary II Budget that factors in lower revenue projections.
"Ordinary revenues by the end of 2024/25 are therefore projected at Sh2.581 trillion, which is Sh50.5 billion lower than the Sh2.631 trillion projected in Supplementary I," Kiptoo stated.
Meanwhile, the government has announced plans to engage in discussions with the International Monetary Fund (IMF) for a new financial support program, set to begin in March.
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