KRA banks on tax base expansion, ministry revenue to reach Ksh.4 trillion target

The 2025 Budget Policy Statement outlines how the government will depend on KRA's revenue collection efforts in the Financial Year 2025/26 and over the medium term, focusing on domestic resource mobilization efforts.

These efforts include implementing the National Tax Policy and MTRS 2024/25-2026/27, strengthening tax administration for enhanced compliance by expanding the tax base, minimizing tax expenditures, and sealing revenue loopholes.

The third one includes focusing on non-tax revenues that Ministries, Departments and Agencies can raise through the services they offer to the public.

"Implementation of the tax administrative reforms will target to reduce tax expenditures that now stands at 3.38 percent of GDP thereby adding revenues," the statement reads in part.

It will also expand the tax base and strengthen tax compliance as envisaged under the MTRS while also help rationalize tax structures to promote domestic production and encourage investments. 

This is projected to be made possible by the Tax Amendment Act, 2024, which will allow for changes that will benefits Kenyans, including increased tax-free pension contributions, introduction of tax cuts for Post-Retirement Medical Funds, pension benefits tax exemptions, and the tax amnesty program.

Likewise, the government plans to instill measures that will strengthen expenditure control and improve efficiency and effectiveness in public spending. 

These measures will include implementation of austerity measures aimed at reducing recurrent expenditure, roll out an end-to-end e-procurement system to maximise value for money and increase transparency in procurement, piloting a Human Resource Management System which will be rolled out to all Ministries and County Governments to improve the management of the wage bill.

It also plans to scale up use of Public Private Partnerships (PPPs) framework for commercially viable projects to manage ease provision of public services and expedite governance reforms targeting state corporations.