NAIROBI, Kenya – The Kenya Revenue Authority (KRA) is lobbying Parliament to amend the law to guarantee it a minimum of 2 per cent of the country’s annual revenue, citing a ballooning Sh24 billion funding shortfall that it says threatens its operations and digital transformation plans.
KRA Commissioner General Humphrey Wattanga made the appeal during a presentation to the National Assembly’s Finance and National Planning Committee on Friday, where he warned that current funding levels are insufficient to meet the authority’s expanding mandate.
“The provisional funding works out to a rate of 1.04 per cent, which is below the National Treasury’s allocation for 2024/25, and far below our operational requirements,” Wattanga told MPs.
The revenue authority has been allocated Sh27.89 billion in the upcoming 2025/26 financial year, all of it earmarked for recurrent spending — with no allocation for development.
KRA had requested a Sh57 billion budget in January, but faces a shortfall of Sh24.13 billion, which rises to Sh24.28 billion when donor-funded projects are excluded.
Development Freeze
The lack of development funding, Wattanga said, has already begun affecting KRA’s capacity to deliver.
He pointed to a freeze on procurement of essential tools — such as scanners at border points — and warned of more service disruptions if the gap isn’t bridged.
The agency is also grappling with pending bills and defaults on service contracts.
A significant portion of KRA’s costs are driven by personnel and technology.
The payroll for the current financial year is projected to reach Sh24.31 billion — excluding new hires — with the authority hoping to recruit 1,300 additional staff at a cost of Sh3.6 billion.
Wattanga said KRA needs a total of 5,092 new staff to operate at full capacity.
Technology and system maintenance costs are also on the rise. Contracted services — including software licenses, equipment maintenance, e-seals, and security — are estimated at Sh11.14 billion.
Digital Agenda at Risk
Wattanga urged MPs to approve an additional Sh3.7 billion specifically for the KRA’s technology, innovation and digitisation agenda, warning that efforts to expand the tax base and automate collections could stall without proper funding.
“KRA is pursuing full modernisation of revenue collection systems. This digital transformation is critical for compliance and taxpayer growth,” he said.
But even as the authority pushed for more funds, committee chair Kuria Kimani raised concerns over the KRA’s performance and growing revenue gap.
“As of May 22, 2025, KRA had collected Sh2.263 trillion against a cumulative target of Sh2.39 trillion — a shortfall of Sh129 billion with one month left in the financial year,” Kimani noted.
He also called out government institutions for failing to remit statutory deductions like Pay-As-You-Earn (PAYE) and withholding taxes, even while paying salaries.
“How do you expect the private sector to comply when government institutions are the biggest defaulters?” he posed.
Structural Reform Sought
The push for a fixed 2 per cent share of annual revenue would formalise and protect KRA’s funding stream, insulating it from year-to-year budget uncertainty.
If successful, it could reshape how the taxman operates, giving it greater autonomy to scale up enforcement, technology and staff capacity.
It would also mark a rare instance of a government agency asking to be constitutionally entitled to a slice of the national cake — a move likely to face scrutiny amid broader debates over public spending and fiscal discipline.
