National Treasury Cabinet Secretary John Mbadi has disclosed that the Kenya Revenue Authority (KRA) experienced a major system failure for six consecutive days in November 2024, which hindered the agency’s ability to meet its tax collection targets for the month.
In an interview on Monday, February 3, Mbadi explained that the technical glitch resulted in a complete halt in tax collection for nearly a week, causing the authority to miss its financial goals.
“There was a system failure for six days in November, during which KRA was unable to collect taxes. This led to us falling short of our target,” Mbadi said.
While investigations into the cause of the failure are ongoing, Mbadi suggested the possibility of internal involvement, stating that there were suspicions of an “insider job,” though he awaits the final results of the probe.
The system breakdown came at a time when KRA had already faced challenges in meeting its targets earlier in the year, particularly during July, August, and September, due to protests over the controversial Finance Bill 2023.
However, the Authority did surpass its target by sh 8 billion in October.
In light of these challenges, Mbadi indicated that the government is considering lowering corporate taxes, VAT, and PAYE rates, but only once KRA’s reforms begin to show tangible results.
He emphasized that such tax cuts would be beneficial for the economy by boosting growth and improving purchasing power, but cautioned that it may not be feasible at the moment due to the government’s current struggle with servicing national debt.
“Lowering taxes right now could harm the economy.
We are still managing a heavy debt burden, so any move that results in a decline in tax collection would not be ideal for our current financial situation,” he explained.
Mbadi further elaborated that once KRA’s performance improves, the government would consider reducing tax rates to foster economic growth.
However, he also raised concerns about the unpredictability caused by frequent changes to tax laws and policies, calling for more stability in the country’s fiscal approach.
“To ensure confidence in the tax system, we need to avoid drastic and frequent changes in our tax laws, which leave businesses uncertain about the future,” Mbadi stated.
He also revealed plans to introduce a finance bill aimed at simplifying taxation processes, which would offer a more stable and predictable framework for businesses and taxpayers alike.
The CS emphasized that any reforms in taxation must prioritize consistency and long-term planning to create a more reliable and efficient system for tax collection.
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