Treasury Misses Revenue Target as VAT Shortfalls Weigh on Q3 Fiscal Performance

The Treasury collected K40.49 billion in total revenue and grants by the end of the third quarter, falling short of the K44.79 billion target and resulting in an under collection of 9.61 percent, according to the latest fiscal data from the Ministry of Finance.

Of the total collections, tax revenue accounted for K31.97 billion, while non-tax revenue amounted to K7.98 billion and grants stood at K546.41 million. Tax revenue performance remained below expectations, with collections missing the quarterly target of K35.02 billion by 8.73 percent.

The weaker tax outturn was largely attributed to lower Value Added Tax (VAT) collections, following system challenges linked to data validation on the Smart Invoice platform. These challenges led to reduced VAT payments by some taxpayers during the quarter. In addition, prolonged load shedding negatively affected collections under the Rural Electrification Levy, contributing to lower overall excise duty receipts.

Despite the VAT shortfall, income taxes outperformed expectations, recording an 8.11 percent increase above target. This strong performance was driven by higher company tax payments, reflecting increased provisional tax contributions from both mining and non-mining companies. Further support came from improved remittances of withholding taxes on contractors, rental income, interest and royalties.

Non-tax revenue posted a favourable outturn, with collections reaching K7.98 billion against a target of K7.60 billion, representing a 4.98 percent over-performance. This was mainly supported by stronger-than-expected collections of fees and fines by various revenue-collecting agencies, alongside solid inflows from road user charges and toll receipts.

On the expenditure side, government spending totalled K55.51 billion, below the projected K62.85 billion, translating into an under execution of 11.68 percent. The lower spending was largely a result of constrained revenue inflows during the quarter.

As a result of the revenue shortfall and expenditure patterns, the primary balance recorded a deficit of K3.02 billion during the third quarter, highlighting continued fiscal pressures despite efforts to contain spending.