NAIROBI, Kenya— The Kenya Revenue Authority (KRA) is dialing up its war on VAT non-compliance, fraud, and phantom traders, all in a bid to plug revenue leaks and grow Kenya’s tax base. And this time, it’s leaning on tech, tighter registration, and a bit of old-school face-to-face vetting.
At a stakeholder forum in Nairobi, KRA Deputy Commissioner for Micro and Small Taxpayers, Dr. Gideon Muhwa, laid it all bare.
VAT, he said, should be Kenya’s bread-and-butter tax—yet it’s not living up to expectations. Fraud, non-compliance, and clever loophole tactics have left the system underperforming, even as Kenya’s tax-to-GDP ratio hovers around 16 percent—far below South Africa’s 27 percent.
To shift the gears, KRA launched an automatic VAT return system in December 2024, powered by eTIMS (electronic Tax Invoice Management System). Think of it as a smart assistant for your taxes: it pulls invoice data and pre-fills your returns. And at first, it worked like a charm—VAT collections rose by 17% in December and 15% in January.
But the honeymoon didn’t last. By March 2025, returns had slipped 11%, and not because of economic headwinds. Fraudsters had found the backdoor, exploiting the system with bogus claims and false inputs.
KRA’s audits uncovered some eyebrow-raising behavior. Dozens of companies were issuing massive invoices and then ghosting when it came time to pay up.
In fact, 71 taxpayers claimed to have bought goods worth Sh29.8 billion from either dormant or barely-registered firms. Another 120 firms issued Sh11.5 billion in invoices in their first month of operation—then promptly forgot to file VAT returns.
Even more bizarre? Some of these “businesses” were registered using stolen IDs. Many shut down almost immediately after setting up shop. It’s the kind of behavior KRA says fits the mold of “missing traders,” entities that exist solely to funnel fake invoices and vanish.
Another trend? Payment Returns Without Payment (PWP)—where businesses file returns showing VAT liability but don’t actually pay a cent. Yes, that’s a thing, and it’s currently under active investigation.
To counter this, KRA has brought back its VAT Special Table, a surveillance tool used to flag suspicious taxpayer behavior. So far, more than 101,000 micro and small taxpayers have been flagged—many of whom are still issuing eTIMS invoices despite being inactive for months.
And there’s a new gatekeeper in town. VAT registration, once handled by over 600 officers, is now the job of just 170. Every application goes through a multi-agency vetting process that includes in-person interviews and physical inspections. No office? No papers? No registration.
“We only approve VAT registration for businesses that demonstrate genuine commercial activity,” said Dr. Muhwa. The message? If your business is legit, you’re welcome. If you’re setting up shell companies, prepare for a different kind of visit.
KRA has also assembled a dedicated task force to go after VAT-related fraud and prosecute offenders. Meanwhile, Dr. Muhwa insists the agency’s mission isn’t to punish—it’s to support. “We’re here to grow the tax base and help businesses thrive. But we won’t hesitate to act against those abusing the system,” he said.
KRA Deputy Commissioner for Human Resources, Ms. Patience Ndutu Njau, reminded everyone that filing is not optional. “If you have a PIN, you’re required by law to file returns—whether you’ve earned income or not,” she said. She urged taxpayers not to wait until the last minute to avoid system bottlenecks.
She also emphasized that accurate and timely filing is essential for national development—from infrastructure to healthcare and education.
