The government has revised the additional revenue it seeks to raise through the Tax Laws (Amendment) Act 2024, the Tax Procedures (Amendment) Act 2024, and the Business Laws (Amendment) Act 2024 downward by a massive Sh104.6 billion.
According to the National Treasury, the government now expects to raise just Sh70 billion in additional revenue in 2024/25, down from the Sh174.6 billion that was projected.
This means that the government has drastically slashed the projected additional revenue yield from the measures that took effect on December 27, 2024, by 59.9 percent or Sh104.6 billion.
“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,” National Treasury Principal Secretary (PS) Chris Kiptoo, told attendees of an economic and sustainability forum organised by Diamond Trust Bank.
“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 Tax Laws (Amendment) Act 2024, the Tax Procedures (Amendment) Act 2024, and the Business Laws (Amendment) Act 2024 anticipate opening more revenue streams through changes to the Income Tax Act, the Value Added Tax Act (VAT Act), the Excise Duty Act, the Miscellaneous Fees and Levies Act, and the Tax Procedures Act.
For instance, the Tax Laws (Amendment) Act 2024, targets new revenues from reforms including the extension of the tax amnesty, higher excise taxes for alcohol and cigarettes, and telephone and data services.
In the first six months of the current financial year, total revenue collections stood at Sh1.37 trillion, having missed the target by Sh62.8 billion.
The main contributor to this under-performance was Value Added Tax which collected Sh304.08 billion, missing target by Sh36.51 billion.
Pay- As- You- Earn (Paye) was the second largest contributor to the revenue shortfall in the first six months of the current financial year, having mobilised Sh275.9 billion, missing the target by Sh21.33 billion.
“By the end of January 2025, revenue collection was below target by Sh92.6 billion mainly on account of a shortfall in ordinary revenues of Sh113.0 billion as Ministerial Appropriation-in-Aid surpassed target by Sh20.3 billion," Dr Kiptoo said.
"We have proposed a supplementary II Budget that reflects lower revenues in this financial year. Ordinary revenues by the end of 2024/25 are therefore projected at Sh 2.581 trillion being Sh50.5 billion lower than Sh 2.631 trillion projected in Supplementary I,” the PS added.
The government has announced that it will be commencing talks with the International Monetary Fund 9IMF) for a new programme in March.
