NAIROBI, Kenya—The Kenya Revenue Authority (KRA) collected Sh2.844 trillion in the 2025/26 financial year, marking a 10.57 per cent increase from the previous year but falling short of its annual revenue target by Sh132.51 billion.
The revenue performance translates to a 95.55 per cent achievement against the set target, highlighting continued growth in tax collections despite challenging economic conditions and lower-than-expected performance in some tax categories.
Exchequer Revenue Misses Target
According to the latest revenue outturn, exchequer revenue amounted to Sh2.568 trillion, while agency revenue collections reached Sh276.14 billion.
Agency collections posted a stronger performance rate of 99.1 per cent, helping cushion softer exchequer collections, which achieved 95.2 per cent of the target.
The latest reporting also reflects a shift in KRA’s presentation of its performance, with the authority placing greater emphasis on sectoral contributions rather than leading with individual tax heads.
Customs Leads Revenue Growth
Customs revenue emerged as the best-performing tax segment during the financial year.
KRA collected KSh988.78 billion from customs revenue, exceeding its target with a performance rate of 100.8 per cent.
The strong customs performance continues to underscore growth in imports and trade-related tax collections, making it the authority’s strongest revenue pillar during the period under review.
PAYE and Corporate Tax Show Mixed Results
Pay As You Earn (PAYE), Kenya’s largest source of domestic tax revenue, generated KSh598.81 billion.
While PAYE collections grew by 6.7 per cent compared to the previous financial year, the tax head achieved only 91.8 per cent of its annual target, suggesting slower-than-anticipated employment and wage growth.
Corporate Income Tax, however, recorded stronger performance.
Collections reached Sh346.07 billion, representing a 14 per cent year-on-year increase, driven largely by improved profitability in the financial services sector.
The performance indicates continued resilience among corporate taxpayers despite broader economic pressures.
VAT Performance Affected by Fuel Tax Changes
Domestic Value Added Tax (VAT) collections rose to Sh355.26 billion, reflecting annual growth of 8.5 per cent.
However, KRA noted that reducing VAT on petroleum products from 16 per cent to 8 per cent significantly affected revenue performance during the second half of the financial year.
The policy change, introduced to cushion consumers from rising fuel costs, reduced the tax authority’s VAT collections from petroleum products.
Betting Taxes and Digital Economy Record Strong Growth
Domestic excise duty collections stood at Sh61.85 billion during the financial year.
Excise tax on betting was among the standout performers, generating Sh16.53 billion and achieving 115.9 per cent of its target.
Meanwhile, collections from the Significant Economic Presence Tax (SEPT)—which targets non-resident digital businesses earning income from Kenya—more than doubled to Sh1.61 billion.
The figures reflect continued expansion of taxation within Kenya’s growing digital economy.
Debt Recovery and Tax Base Expansion
KRA also reported significant gains through compliance and enforcement measures.
Tax debt recovery yielded Sh144.82 billion during the financial year, while Alternative Dispute Resolution (ADR) mechanisms resolved 993 tax disputes, unlocking Sh35.06 billion in revenue.
In addition, tax base expansion initiatives generated Sh9.1 billion, demonstrating continued efforts to bring more individuals and businesses into the tax system.
Revenue Strategy Shifts Towards Economic Growth
The latest revenue report suggests KRA is increasingly framing its performance around broader economic sectors rather than individual tax categories.
The approach reflects the authority’s growing emphasis on expanding the country’s economic base to support sustainable revenue growth instead of relying solely on higher tax rates or intensified enforcement.