Treasury targets Sh323.5 billion more in taxes

Economy

Treasury targets Sh323.5 billion more in taxes

Friday February 16 2024

Cabinet Secretary for National Treasury and Economic Planning Prof Njuguna Ndung’u. PHOTO | DENNIS ONSONGO | NMG

The government plans to collect an additional Sh323.5 billion in taxes, in a budget spending plan that will see the William Ruto-led administration spend a total of Sh4.55 trillion, mostly on salaries and debt repayments.

In the 2024 Budget Policy Statement (BPS), the government targets to collect Sh2.95 trillion in taxes in the fiscal year 2024/25 (July to June), relying on the proposed far-reaching tax measures that target the hard-to-tax sectors such as the informal, digital and agricultural activities.

In the current fiscal year ending June this year, the Kenya Revenue Authority (KRA) has been tasked with collecting Sh2.62 trillion from both direct and indirect taxes. These collections rely heavily on the revenue-raising measures contained in the Finance Act 2023, including the doubling of the value-added tax (VAT) on fuel.

Already, the KRA has missed its target for the first six months by Sh186.2 billion, with income taxes paid by corporations and employees contributing the most to this shortfall, a Treasury document shows.

The taxman collected Sh1.09 trillion between July and December last year as the Kenya Kwanza administration continues to implement its first budget which has been characterised by high taxes aimed at reducing the budget hole through a process known as fiscal consolidation.

“The consolidation will be supported by enhanced revenue mobilisation and rationalisation of non-priority expenditure while protecting essential social and development budget,” said the Cabinet Secretary for National Treasury and Economic Planning Professor Njuguna Ndung’u.

To support its fiscal consolidation, the government entered into a conditional financing arrangement with the International Monetary Fund (IMF) in what was aimed at averting a fiscal crisis as the country inches closer to the June deadline for the repayment of the $2 billion (Sh291 billion) of the Eurobond.

Last week, the Treasury raised $1.5 billion through a Eurobond issuance with the proceeds of the bond expected to be used to buy back part of the 2024 sovereign bond.

Read: Kenya pays dearly to avoid Sh316bn Eurobond default

In the upcoming fiscal year, the National Treasury plans to borrow Sh753.2 billion with a big chunk of the financing, Sh377.7 billion, coming from the domestic investors.

The government will borrow Sh326.1 billion from foreign creditors, mostly multilateral institutions such as the World Bank and the IMF.

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