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{
    "id": 1532600,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1532600/?format=api",
    "text_counter": 4853,
    "type": "speech",
    "speaker_name": "Molo, UDA",
    "speaker_title": "Hon. Kuria Kimani",
    "speaker": null,
    "content": "Kenya's recent shortfall in terms of tax collection is neither buoyant nor elastic enough to capture its full economic potential. Our growth rate in GDP is not represented in our growth in revenues, which means critical inefficiencies must be fixed. To explain, tax buoyancy refers to how tax revenues grow in response to GDP growth, where a buoyancy ratio of less than one indicates that the tax system is not responsive enough to economic growth. In contrast, a tax buoyancy ratio of more than one means there is over-taxation. Our tax buoyancy ratio shows that our revenue collections do not correspond with our GDP growth, which raises serious questions on inefficiencies and leakages in our revenue mobilisation. In the Report that we submitted to the Liaison Committee, and as tabled in this House, we recommended strengthening tax compliance and administration through some of the following areas: 1. Enhanced digital tax collection systems, including e-taxation and Artificial Intelligence (AI) driven audits. We should move from regular book audits to using technology like AI audits to audit tax collection. 2. Broadening the tax base to reduce over-reliance on Pay As You Earn (PAYE) and corporate taxes. Due to not broadening our tax base, we over-rely on PAYE. That has a net effect on the Consolidated Fund. One of the recommendations that we are making is that we have created too many funds outside the Consolidated Fund, which has two challenges: (a) Withdrawals of funds outside the Consolidated Fund do not require the approval of the Controller of Budget. (b) Our debt obligations are paid from the Consolidated Fund. We should audit all those funds, especially those that have achieved their mandate so that they can be folded up or so that we can cap the limit of amounts sent to those funds so that that money can go to the Consolidated Fund. The result is a strain on what should go to the Consolidated Fund, whereas many collections are going to different funds outside the purview of the approval of the Controller of Budget. Our total revenue for the Financial Year 2024/2025 is projected to be at Ksh3 trillion, which is 12.6 per cent of our GDP. All the revenue has been revised downwards in the new Estimates to Ksh2.58 trillion, a Ksh50.5 billion reduction from the previous estimates we approved in the First Supplementary Estimates. 3. The national tax rates must strike a balance between revenue maximisation and economic growth stimulation by ensuring that we grow investments and discourage tax avoidance. We are making the following policy recommendations: 1. We must strengthen public expenditure and financial accountability mechanisms to ensure that revenue estimates remain realistic and data-driven. 2. We must improve expenditure tracking systems to align public spending with revenue collection cycles. The reason we tend to have supplementary budgets all the time is because we tend to overstate our expected revenues. It is unnecessary, but there are inefficiencies. The overstating of our revenues means we also over budget on the expenditure side. The Cabinet Secretary then told us we did not have enough revenue-raising measures. That is notable because every Member who has contributed has asked for more fund allocations for our roads, water, health, and clinical services. However, that tends to stretch the Budget on the other side continuously. What do the National Treasury and this House do? To handle that pressure, we overstate the revenues. Now that we are headed towards the end of the fiscal year, we do not have the necessary resources to finance those expenditures. The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}