The Kenya Revenue Authority (KRA) exceeded its own revenue targets for the financial year 2024/25 by collecting Sh2.571 trillion. These tax collections were an improvement from the Sh2.407 trillion collections the taxman managed in the previous 2023/24 financial year.
The collections saw the KRA beat its own revenue collections target that had been set at Sh2.555 trillion. This was equivalent to a a growth of 6.8 percent and a performance rate of 100.6 percent. The taxman attributed this growth to a 4.7 per cent rise in Gross Domestic Product (GDP).
“The revenue performance reflects the prevailing economic indicators especially the GDP growth of 4.7 percent with notable growth recorded in key sectors like agriculture, forestry and fishing, financial and insurance activities, transportation and storage, and real estate.. The exchange rate of the Kenya shilling against the US dollar strengthened to an average of Sh129.35 during the year from Sh144.1 previously,” KRA said in a statement.
During the period under review, KRA recorded a 4.5 percent rise in exchequer revenue with collections of Sh2.323 trillion while another Sh248.2 billion was collected for other government agencies, surpassing the target by Sh40.4 billion.
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Domestic revenue grew by 4.8 per cent to Sh1.688 trillion while customs revenue rose by 11.1 percent to Sh879.3 billion.
Collections were higher in the second half of the financial year 2024/25 than the first. The taxman blamed the poor performance that was recorded in the first half on economic headwinds, including shelving of the Finance Bill 2024, high bank lending rates, global tariffs war, and international conflicts.
“Overall import values recorded weak growth of 0.04 percent, affected by drop in import values of fuels and lubricants, and food and beverages which recorded declines of 16.4 percent and 14.6 percent respectively. Further, export values declined by 2 percent especially from horticulture which was down 2.5 percent and tea which was down 15.4 percent,” the KRA said in a statement.
In the second half of the financial year, revenue grew by 9.1 percent, compared to the 4.5 percent growth recorded in the first half of the financial year.
The taxman further noted that access to credit by the private sector remained constrained due to higher commercial bank lending rates in the current year compared to the previous year.
As at the end of December 2024, credit extended by commercial banks to the national government grew by 13.9 percent, while credit to the private sector declined by 1.1 percent. This contraction in private sector credit dampens the prospects for investment and expansion across key economic sectors.
During the year, domestic VAT collection stood at Sh327.336 billion, reflecting a growth of 4.2 percent compared to the previous year.
In the first half of the financial year, the revenue authority collected Sh148.374 billion while in the second year, collections jumped to Sh178.962 billion. This improvement was attributed to initiatives that included strict VAT registration controls and verification of declarations.
Corporation tax grew by 9.9 percent compared to 4.9 percent in the last financial year, after KRA collected Sh304.833 billion against a target of Sh321.080 billion. Domestic excise on the other hand recorded a performance rate of 97.2 percent, with a collection of Sh69.385 billion.
The performance was attributed to a decline of revenue remittance from manufacturers of beer and tobacco products by 13.9 percent and 8.9 percent respectively. At the same time, KRA collected Sh560.963 billion from Pay As You Earn (P.A.Y.E). This was equivalent to a growth of 3.3 percent.
“The slow growth was attributed to utilization of adjustment vouchers by taxpayers to offset tax liabilities and policy impacts, which included adjustment of SHIF and Housing Levy from relief to allowable deductions before tax computation,” the taxman said in a statement.
