The Kenya Revenue Authority has reported a tax collection outturn of Ksh 1.143 trillion for the first half of the 2025/26 financial year, exceeding the programmed target by Ksh 18 billion — a 1.6 per cent positive variance that represents one of the authority’s best half-year performances in recent memory. The figure, covering the period July to December 2025, was announced by KRA Commissioner-General Humphrey Wattanga at a press briefing that also outlined the technology investments and enforcement actions that underpinned the result.
Income tax — from both Pay As You Earn (PAYE) deductions on formal sector workers and corporate income tax payments — was the largest contributor to the overperformance, coming in Ksh 7.4 billion above target. Value Added Tax collections exceeded projections by Ksh 5.9 billion, while customs and excise duties together added a further Ksh 4.7 billion. The results came despite a deliberately cautious economic environment in which businesses and households remained wary of discretionary spending.
Technology as the Game Changer
Commissioner-General Wattanga attributed the overperformance primarily to the continued rollout of the KRA’s digital compliance infrastructure. The Electronic Tax Invoice Management System (eTIMS), which mandates real-time invoice transmission from registered businesses directly to KRA servers, has now been adopted by over 290,000 businesses — up from roughly 80,000 at the start of 2025. The system has made VAT evasion through fake invoices and suppressed sales significantly more difficult, with KRA data showing that declared VAT turnover from eTIMS-registered businesses rose 23 per cent year-on-year.
“eTIMS is transforming our relationship with taxpayers,” said Wattanga. “Instead of chasing compliance after the fact, we now have a continuous, real-time picture of economic activity. The honest majority of businesses benefit because we can focus enforcement resources on genuine bad actors.”
The KRA’s data analytics unit has also been using machine learning models to identify anomalies in tax returns, cross-referencing business declarations with data from the National Transport and Safety Authority (vehicle imports), the Lands registry (property transactions), and Safaricom’s M-Pesa agent network. Several high-profile enforcement actions against major retailers and importers — some resulting in criminal prosecutions — were credited with encouraging voluntary compliance across their respective sectors.
Multinational Tax and the Transfer Pricing Push
A notable component of the overperformance came from KRA’s Large Taxpayer Office, which handles the roughly 2,000 companies that account for approximately 70 per cent of total tax revenue. The authority has intensified its transfer pricing audits of multinational corporations operating in Kenya, pursuing claims that inter-company transactions have been structured to shift profits to lower-tax jurisdictions. Three settlements reached in the second half of 2025 — involving companies in the telecommunications, fast-moving consumer goods, and oil marketing sectors — contributed an estimated Ksh 4 billion in additional assessments.
Kenya is also participating in the OECD’s global minimum tax framework, which establishes a 15 per cent effective tax floor for large multinational enterprises. KRA is preparing domestic legislation to implement the Qualified Domestic Minimum Top-Up Tax (QDMTT), which would allow Kenya to collect top-up taxes on MNCs that have been paying effective rates below 15 per cent — a measure projected to yield an additional Ksh 8–12 billion annually once fully operational.
The half-year overperformance is politically significant for the Ruto administration, which has faced intense criticism over its revenue-raising ambitions since the Finance Bill 2024 was withdrawn following the Gen Z protests. The government has been forced to find alternative revenue measures that are less politically toxic than broad-based tax increases, and the KRA’s enforcement-and-digitisation strategy has emerged as the most viable path. Whether the momentum can be maintained in the second half of the year — typically more challenging due to seasonal patterns in corporate tax payments — will be the key test.
0 comments