Kenya's shift to single paybill system boosts state revenue by Sh18.5 billion

The government's adoption of a single paybill system for collecting revenue has significantly boosted the funds raised from public services, with the state's appropriations in aid (AiA) rising by Sh18.5 billion in just three months.

For the quarter ending September 2024, the government collected a total of Sh111.3 billion in AiA, up from Sh92.8 billion during the same period in 2023.

This impressive performance not only marks an increase in funds generated but also surpassed the government's target by 28.8 per cent.

The Parliamentary Budget Office (PBO), in its December economic bulletin, attributes the rise in AiA collections to the centralisation of revenue collection, which began in 2023.

Under the new system, all payments for public services are funnelled through a single paybill number, 222222, eliminating the previous practice where individual agencies could collect fees through separate accounts.

This move has streamlined the revenue collection process and improved the tracking of government cash flows.

"There was strong revenue performance during the first quarter of FY 2024/25, which was driven by an increase in AiA. The improved performance of AiA collection was partly attributed to the digitization and centralization of AiA collection through e-citizen," the PBO reads.

The government's push towards digitising services through eCitizen has been a key factor in this success.

Since 2023, over 15,000 services have been added to the platform, with payments now made directly through the central paybill. This has provided the Treasury with greater oversight and more efficient tracking of revenue, boosting the total collections for the quarter.

Treasury had originally aimed to collect Sh86.4 billion in AiA by the end of September 2024. However, by the close of the period, they had exceeded this target by Sh24.9 billion, generating Sh111.3 billion in total.

While the AiA performance has been strong, tax collections for the first quarter of the Financial Year 2024-2025 fell short of their targets.

Tax revenue amounted to Sh590.8 billion, missing the target of Sh605.5 billion by Sh14.6 billion.23

The shortfall was primarily driven by underperformance in several key tax categories, including Value Added Tax (VAT), Excise Duty, Import Duty, and Pay-As-You-Earn (PAYE) tax.

"Ordinary revenue fell short of the target by Sh14.6 billion. This was as a result of the underperformance of VAT by Sh15.2 billion, Excise Duty (by Sh5.6 billion), Import Duty (by Sh2.8 billion), and PAYE (by Sh1.8 billion)," the PBO reads further.

Despite missing the target, tax collections still saw a year-on-year increase of Sh54 billion, or 10 per cent, compared to the same period in FY 2023-2024.