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Treasury targets telcos, rental properties to raise revenue collection to Sh2.8trillion

The measures outlined in the 2023/24 Budget Policy Statement are part of the administration’s economic turnaround plan to scale up revenue collection to fund the total budget for the next financial year which is projected at Sh3.641trillion

NAIROBI, Kenya, Jan 19 – The National Treasury plans to integrate the KRA tax system with telecommunication companies, and the informal sector coupled with implementing rental income tax measures to increase revenue collection to Sh2.8trillion in the 2023/24 financial year.

The move will see the Kenya Revenue Authority (KRA) implement systems to monitor mobile money transactions, payments in the informal sector, and rent payments by mapping rental properties to expand its tax base.

“To enhance tax compliance, we will integrate KRA tax systems with critical Government systems to allow seamless exchange of information for a 360-degree view of the taxpayers’ economic transactions,” said Treasury.

The measures outlined in the 2023/24 Budget Policy Statement are part of the administration’s economic turnaround plan to scale up revenue collection to fund the total budget for the next financial year which is projected at Sh3.641 trillion.

Expansion of the tax base has been a key part of President William Ruto’s administration, in October last year he tasked KRA to follow on Safaricom’s M-Pesa success noting that there are only 7 million people with KRA pin numbers while M-Pesa has 30 million active users.

“The fact that this opportunity remains unclear to KRA demonstrates why radical changes are necessary. Safaricom, a telco, has registered more people than KRA, a powerful state organization. It is very clear that the magic lies in technology and strategy, not power and resources,” Ruto said.

KRA’s plan to integrate its systems with telcos means it will start monitoring mobile money transactions which grew by 15.2 per cent in the 11 months to November last year.

Data from the Central Bank of Kenya (CBK) show the value of mobile money transactions hit Sh7.2 trillion for the 11-month period, up from Sh6.24 trillion.

As part of the tax policy reforms, Treasury has also tasked KRA to reduce the gap in Value Added Tax (VAT) collections from 38.9 per cent to 19.8 per cent of the potential revenue by fully rolling out the electronic Tax Invoice Management System (eTIMS).

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The new automated registers will allow KRA to receive sales and invoice data daily curbing tax evasion and in turn boosting revenue collections.

Further, KRA will roll out measures at the Customs and Border Control leveraging technology and enhanced data analytics to enhance revenue per unit; it has also been tasked to upscale its technical capacity through skills, technology, and additional staffing.

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

For the 2023/24 financial year, the overall nominal expenditure and net lending projected at Sh3.64trillion comprises of recurrent of Ksh 2.42trillion(14.9 percent of GDP) and development of Sh796.4 billion (4.9 percent of GDP).

Reflecting the projected expenditures and revenues, the fiscal deficit (including grants), is projected at Sh695.2 billion (4.3 percent of GDP) in FY 2023/24 against the estimated overall fiscal balance of Sh849.2 billion (5.8 percent of GDP) in FY 2022/23.

“The fiscal deficit in FY 2023/24, will be financed by net external financing of Sh198.6 billion (1.2 percent of GDP), and net domestic borrowing of Sh496.6 billion (3.0 percent of GDP),” Treasury said.

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