Higher oil taxes push KRA revenue past Sh1 trillion
The taxman has achieved Kes1.03 trillion in revenue collections as of 8th December, owing to a robust performance in oil revenues following the revision of VAT to 16 percent in line with the Finance Act 2023.
The Kenya Revenue Authority reported a 15.8 percent increase in collections in November, with KRA collecting Kes180.714 billion, up from Kes156.095 billion realized in the comparable month in 2022.
According to the taxman, revenue collection has increased in the last 5 months (July – November 2023/24), with KRA collecting Kes963.746 billion compared to Kes856.646 billion recorded in the same period in FY22/23. This represents a growth of 12.5 percent.
KRA stated that oil taxes collected reached Kes27.943 billion, translating to a growth of 42.5 percent compared to the same period in the last financial year. This performance was mainly driven by growth in both overall oil volumes and values by 36.7 percent and 49.5 percent, respectively.
At the same time, customs recorded the second-highest monthly collection at Kes72.116 billion, equivalent to a growth of 17.6 percent over Kes61.322 billion realized in November 2022.
Despite the progressive growth, the collection was affected by the performance of key economic indicators that directly drive revenue collection. One of the significant indicators is the considerable depreciation of the Kenyan shilling against the US dollar by 24.7 percent in November 2023 and 22 percent in July – November 2023.
Read also: CBK rate pushes banks’ limits to keep loan rates low
Import demand
This, coupled with increasing prices of key products like oil, has the effect of driving down import demand. While import values (in Kenyan Shilling terms) grew by 36 percent and 11 percent in November 2023 and July – November 2023, respectively, in dollar terms, the growth for the month was subdued to 9 percent, with a cumulative decline of 9.2 percent.
Revenue performance was also affected by low domestic demand, as indicated by the slowed Purchasing Managers Index (PMI), which averaged at 47.18 points in July – November 2023, down from 48.66 points in July – November 2022. In particular, depressed aggregate demand is also noted in seemingly slow GDP growth.
The tight financial markets, marked by an increase in lending rates and interbank rates, have slowed down credit extension, especially to the private sector, resulting in a decline in bank profitability by 4.9 percent as of September 2023.
KRA targets to collect Kes2.787 trillion by the end of FY2023/2024. KRA is confident that it will continue with the upward trajectory and achieve the set target to enable the government to sustain the country’s economy.
