KRA misses revenue target despite 10.6% growth in tax collections

Kenya Revenue Authority (KRA) collected KSh 2.844 trillion against a target of KSh 2.969 trillion in the 2025/2026 financial year, a period during which the economy continued to grow at a slower pace, and businesses faced pressure from higher costs, inflation, and softer operating conditions.

However, the tax collector recorded 10.6 per cent growth compared to 6.8 per cent in the 2024/2025 financial year when KRA collected KSh 2.572 trillion.

During the 2025/2026 financial year, which runs from July 1 to June 30 of the following year, revenue growth was influenced by KRA’s use of technology, simplified services, tax base expansion, taxation at source, trade facilitation, service excellence and dispute resolution to improve compliance. This was in addition to reduced leakages and making tax processes easier for taxpayers.

What drove the growth?

By June 30, more than 750,000 taxpayers had been onboarded to eTIMs, while services such as pre-populated tax returns, the Shuru WhatsApp chatbot, the USSD service (*222*5#), and the eCustoms mobile application simplified registration, filing, and payment of taxes. These innovations reduced the time and effort required for taxpayers to meet their obligations.

How sectors performed

Customs collected KSh 988.780 billion against a target of KSh 980.794 billion, achieving a 100.8 per cent performance. This was supported by above-target performance in oil revenue and strong non-oil collections.

Domestic revenue grew by 9.7 per cent to KSh 1.851 trillion but achieved 93.0 per cent of the target. Domestic revenue is closely linked to local consumption, employment income, company profitability and sector performance, which were affected by the wider economic environment.

Domestic VAT collected KSh 355.255 billion and grew by 8.5 per cent. Performance improved between January and April 2026 but was affected in May and June by substantial refunds in the oil sub-sector following the VAT rate change from 16 per cent to 8 per cent.

Pay As You Earn (PAYE) collected KSh 598.807 billion and grew by 6.7 per cent. PAYE depends heavily on formal employment income. Formal sector employment as a share of total employment declined from 15.7 per cent in 2022 to 15.3 per cent in 2025, affecting the pace of growth.

Corporation Tax grew by 14.0 per cent, supported by improved profitability and stronger instalment remittances from sectors such as ICT, manufacturing, transportation, energy, and wholesale.

Domestic Excise collected KSh 61.844 billion. Alcoholic beverages accounted for 69.3 per cent of collections, while tobacco products accounted for 14.9 per cent. The performance was strongly influenced by production, consumption and market conditions in these categories.