GENERAL NEWS

Kenya’s Domestic VAT Collection Drops 26.3% in October, KRA Reports Deficit

The fall in VAT revenue resulted in a Sh2.37 billion shortfall, primarily driven by decreased contributions from sectors such as Administrative & Support, Electricity, Oil & Gas, Finance, Professional & Scientific, Transport, and Wholesale & Retail Trade.

Kenya Revenue Authority (KRA) has reported a significant 26.3% drop in Domestic Value Added Tax (VAT) collection for October, attributing the decline to reduced remittances from several key sectors.

The fall in VAT revenue resulted in a Sh2.37 billion shortfall, primarily driven by decreased contributions from sectors such as Administrative & Support, Electricity, Oil & Gas, Finance, Professional & Scientific, Transport, and Wholesale & Retail Trade.

These sectors typically account for around 33% of domestic VAT contributions, but in October, they only represented 14.7% of turnover sales. Meanwhile, inputs showed a modest growth of just 0.5%.

Domestic VAT was one of four tax categories under the Domestic Tax Department (DTD) that experienced weak revenue collection during the month of October.

Additionally, the private sector’s Pay As You Earn (PAYE) remittances underperformed, with a shortfall of Sh1.21 billion. This decline was mainly attributed to large taxpayer office (LTO) clients utilizing refunds to offset liabilities and a reduction in monthly cash payments per employee.

The Domestic Excise Duty also saw a drop of Sh573 million, driven by lower remittances from manufacturers of beer, bottled water, tobacco, and soft drinks. Excise duty on money transfers decreased by Sh728 million, due to reduced transaction volumes in the banking sector.

Non-oil taxes also showed underperformance, with a Sh2.87 billion deficit, achieving only a 93.7% performance rate. Import duty, Excise duty, VAT, and Import Declaration Fees (IDF) on standard imports all saw significant shortfalls, including Sh266 million in import duties, Sh814 million in excise duties, Sh2.25 billion in VAT, and Sh405 million in IDF. These declines were attributed to factors such as reduced revenue per Twenty-Foot Equivalent Unit (TEU), increased exemptions, and a decline in non-oil import values.

KRA also noted a broader decline in revenue collection between July and October in the 2024/25 fiscal year, with overall revenue growth slowing to an average of 5.6%, down from 11.8% during the same period last year.

Abdul

Abdul is a journalist by profession having graduated from St.Paul University.

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