The Kenya Revenue Authority (KRA) revealed that only two in five of the country's 20.2 million registered taxpayers are active. This has led to a Ksh982 billion tax collection gap. Officials cited challenges in the informal sector and under-reporting.
During an engagement with the Kenya Editors Guild (KEG) on April 9, KRA reported that low participation has caused missed revenue targets.
Collections grew to Ksh2.038 trillion by the third quarter of the 2025/26 financial year, up from Ksh1.829 trillion in the same period of 2024/25. Despite this, the Ksh982 billion shortfall has impacted government fiscal planning, with the budget deficit projection revised from 4.7 per cent to 6.1 per cent of gross domestic product.
George Obell, KRA commissioner for micro and small taxpayers, stated that many registered taxpayers fail to file returns or under-report income. The informal sector poses a major challenge, with earnings hard to track in the current tax system.
Shortfalls appear across tax categories, with personal income tax claiming the largest share. KRA estimates only 2.5 per cent of a potential Ksh500 billion from personal income tax is collected. Value Added Tax collections lag expectations at about 60 per cent of a possible Ksh1.03 billion.
Rental income tax yields less than a fifth of the estimated Ksh80 billion. Corporate tax faces an annual Ksh100 billion gap, due to businesses inflating costs to lower taxable profits. To address the deficit, KRA is eyeing reforms like a dual assessment system, where the commissioner issues estimates alongside self-assessments to aid compliance.
"We are looking at a dual assessment regime in the future so that, in addition to self-assessment, we can help our taxpayers also by the commissioner making assessments so that it’s easy for taxpayers to comply," Obell said.
