Kenya's tax agency rolls out reforms after missing targets

Tuesday March 07 2023
Tax Payers Day in Kenya

KRA leadership during the 2022 Taxpayers' Day at the KICC on October 28, 2022. KRA has initiated reforms to ensure it hits the set tax collection targets of 2023. PHOTO | DIANA NGILA | NMG


The Kenya Revenue Authority has initiated a series of changes and measures aimed at improving tax collection, after it missed its targets for the first half of the year by over $340 million (KSh43.49 billion).

KRA collected only $7.8 billion (Ksh999 billion) in the first half of this financial year of the total $20.1 billion (KSh2.57 trillion) needed for the entire year, meaning that the agency will need to almost double its revenue yields in the remaining months to meet the target.

But, while some policy commentators have termed the government’s revenue targets “overly ambitious,” KRA has been busy making reforms to ensure it hits the set targets, which are crucial for the government’s increased spending.

National Treasury and Economic Planning CS Njuguna Ndung'u

Kenya’s Cabinet Secretary for National Treasury and Economic Planning Njuguna Ndung'u. Kenya’s National Treasury plans to raise government expenditure by 15.9 percent to Ksh3.66 trillion (about $29.2 billion). PHOTO | FILE | NMG

House cleaning

Last week, the authority announced a series of changes in its top leadership, in which the commissioner general, Githii Mburu, resigned barely eight months into his five-year term “to pursue personal interests.”


“Four commissioners in charge of customs, domestic taxes, intelligence and corporate support, were also replaced “to further enhance the revenue mobilisation agenda and synergies in top management,” KRA said.

Before the dust could settle, KRA announced that it would no longer be paying tax reliefs “until further notice,” to allow it to audit and enhance the tax relief processes and procedures, a blow to many who were owed refunds.

Read: Debt, inflation weigh down on Kenya economy

“The current suspension and ongoing review of tax reliefs is also aimed at increasing the impact of tax expenditure on economic growth,” KRA Chairman Anthony Mwaura said in a statement on February 28, 2023.

“This will be achieved through minimizing tax expenditure and aligning it with international best practices for better internal revenue.”

But the decision rattled many taxpayers, prompting Mr Mwaura to “clarify” that the authority had only stopped payment of reliefs issued irregularly.

KRA said it has spent up to $4.8 billion (KSh613 billion) on tax reliefs and incentives in the past five years, translating into an annual rate of about $959 million (KSh122 billion).

Mr Mwaura said the betterment of the tax relief processes and procedures is “part of the aggressive revenue mobilization plan aimed at enhancing revenue collection and redirecting resources to finance priority growth-supporting programmes.”


Kenyans at a past meeting on tax payment. PHOTO | FILE | NMG

In similar efforts, Kenya’s Treasury Cabinet Secretary Njuguna Ndung’u this week signed the Tax Procedures (Common Reporting Standards) Regulations, which will allow the taxman unlimited access to information on bank accounts held by Kenyans in 106 countries, including some known tax havens.

The regulations, meant to help KRA step up its hunt for tax evaders who stash money in overseas accounts, will compel local financial institutions to give the taxman information on foreign accountholders, which it will then share with the 106 countries in exchange for similar data on Kenyans.

Weaning off

At the same time, the agency’s domestic taxes enforcement division this week shifted to a new office amidst a massive recruitment exercise geared at strengthening the department’s ability to curb net evaders locally.

These efforts to shore up revenue collection stem from the new administration’s fiscal consolidation plans, which seek to reduce the country’s consistent budget deficits and debt reliance.

In the medium-term budget statement for the period to June 2027, the treasury projected tax revenue to increase to $30 billion (KSh3.8 trillion) in 2027, up from the $16.5 billion (KSh2.1 billion) the agency collected in the last financial year.

According to the plans, government spending will grow by about 50 percent to $33.4 billion (KSh4.28 billion) backed by the anticipated sustained increase in tax revenue, highlighting a heavy task shouldered on Kenya Revenue Authority.

Read: Kenya proposes lavish spending amid slower growth

“Revenue performance will be underpinned by the ongoing reforms in tax policy and revenue administration measures geared towards expanding the tax base,” the treasury said in the draft budget policy statement.