In the six months ending December 2023, collections from taxes on international trade and transfers witnessed a significant decline of Sh7 billion. This decline was primarily driven by tax cuts and a reduction in overall international trade.
The Import Declaration Fee (IDF) collections dropped by Sh3.5 billion to Sh23.9 billion, while the Railway Development Levy (RDL) collections reduced by a similar margin, reaching Sh16.5 billion. These reductions were attributed to tax cuts under the 2023 Finance Act, which aimed to stimulate manufacturing by reducing import costs.
The decline in international trade was a result of rising import costs, which made overseas goods less affordable. This was reflected in the Central Bank of Kenya's data, which showed a 10.6% decrease in total import costs in 2023, leading to lower import values for categories such as iron and steel, palm oil, and paper.
Despite tax cuts, import duty collections experienced a marginal increase of 1.7% to Sh68.2 billion. However, they fell short of the targeted Sh87.6 billion. Similarly, Value Added Tax (VAT) on imports grew by 22.7% to Sh167.9 billion, but missed its target by Sh1.1 billion.
The missed targets in import-related taxes and levies contributed to the Kenya Revenue Authority's Sh186.1 billion ordinary revenue shortfall in the period, as it collected Sh1 trillion against the target of Sh1.2 trillion.