Kenya's Revenue Authority (KRA) failed to meet its tax collection target by $2.09 billion (KES 267 billion) for the financial year ending June 2024, despite raising taxes in the 2023/2024 Finance Bill. This shortfall occurred amidst a tough macroeconomic environment, marked by reduced corporate profits and increased layoffs.

Key Points:

• Revenue Target and Shortfall:KRA set a target of $21.8 billion (KES 2.79 trillion) but only collected $18.8 billion (KES 2.4 trillion), an 11.1% increase from the previous year but still missing the target by 4.5%.
  Corporate Income Tax (CIT): Grew at a slower rate of 4.9% compared to 7.2% the previous year, indicating reduced profitability in key sectors like finance, insurance, ICT, and manufacturing.
  Employee Collections: Recorded the highest shortfall of $567 million (KES 72.3 billion) despite a new tax band targeting top earners.
  
• Sector Performance:Manufacturing: Tax collection dropped by 13%.
  ICT: Declined by 12.3%.
  Finance and Insurance: Fell by 2.4%.
  
• Economic Factors:High operational costs, including energy prices and the weakening of the Kenyan shilling against the dollar, contributed to the economic slowdown.
  Inflation averaged 6.86% in the first half of the year due to high fuel and energy costs but improved to 4.87% by the fourth quarter thanks to the Central Bank's monetary policies.
  

Conclusion:Kenya's tax revenue performance in 2023/2024 highlights the country's challenging economic situation, despite a moderate economic growth of 5.6% compared to 4.9% in 2022. Inflation posed a significant challenge early in the year but saw improvement due to effective monetary policies.

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