The Kenya Revenue Authority (KRA) has reported a robust double digit revenue growth of 10.6% for the Financial Year 2025/2026, significantly outperforming the 6.8% growth recorded in the previous financial year.
The tax authority collected Ksh 2.844 trillion, marking an increase of Ksh 272.953 billion over the Ksh 2.572 trillion gathered in FY 2024/2025. In an official statement, KRA noted that this strong performance underscores sustained growth in domestic revenue mobilization, despite operating in a challenging economic environment.
Five core sectors of the economy, namely Manufacturing, Energy, Financial and Insurance, Information and Communication, and Wholesale and Retail Trade, remained the primary drivers of government revenue, accounting for approximately 62.0% of total collections.
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These sectors, which represent 27.4% of the overall nominal GDP, recorded an aggregate revenue growth of 8.0%. The Energy Sector registered a 9.1% revenue growth to collect Ksh 445 billion, largely driven by the strong performance of Customs oil taxes, contributing 15.6% of the total revenue collected by KRA for the year.
The Manufacturing Sector recorded a 9.2% revenue growth, with collections reaching Ksh 462 billion compared to Ksh 423 billion in the previous fiscal year. The primary tax heads accounting for 74.6% of this performance were Value Added Tax (VAT), Pay As You Earn (PAYE), Excise Duty, and Corporation Tax, with Manufacturing contributing 16.2% to total revenue.
Notably, inputs to the sector in the form of raw material imports, including food, beverages, and industrial non-food supplies, made up 49.0% of Kenya’s overall import value during the period.
The Financial and Insurance Sector accounted for 11.3% of KRA’s revenue in FY 2025/2026, yielding Ksh 320 billion compared to Ksh 311 billion in the previous year. Corporation Tax generated 34.8% of the collections within this sector, while a further 47.1% was driven by Withholding Income Tax and PAYE.
Revenue from the Information and Communication Technology (ICT) sector grew by 7.9%, bringing in Ksh 248 billion against Ksh 230 billion from the prior year, with the sector’s total contribution standing at 8.7% and significant streams coming from Excise Duty on airtime and financial services, Corporation Tax, Domestic VAT, and PAYE. The Wholesale and Retail Trade sector accounted for 10.1% of total revenue, yielding Ksh 288 billion, representing a 10.3% growth compared to the Ksh 261 billion collected in FY 2024/2025.
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Exchequer Revenue grew by 10.5% to reach Ksh 2.568 trillion, up from Ksh 2.323 trillion in the previous financial year, representing a 95.2% performance rate against a set target of Ksh 2.698 trillion. Beyond its primary tax mandate, KRA collects various levies and charges on behalf of other government bodies, and in FY 2025/2026 Agency Revenue grew by 11.2% to reach Ksh 276.139 billion, up from Ksh 248.276 billion the previous year. This translated to a high performance rate of 99.1%, reflecting KRA’s growing capacity to efficiently handle external levies.
Customs Revenue surpassed its target with a 100.8% performance rate, collecting Ksh 988.780 billion against a target of Ksh 980.794 billion. This marks a 12.4% growth compared to FY 2024/2025, driven by strong oil and non-oil revenue streams, which brought in Ksh 370.383 billion at 102.6% performance and Ksh 618.397 billion at 99.8% performance respectively. Domestic Revenues, on the other hand, registered a 9.7% growth, collecting Ksh 1.851 trillion against a target of Ksh 1.991 trillion, yielding a performance rate of 93%.
Among the key tax heads, KRA collected Ksh 598.807 billion in PAYE, representing a 6.7% growth and a 91.8% performance rate. While this improves on the 3.3% growth seen in FY 2024/2025, it remains below the historical 8.5% average growth recorded between FY 2022/2023 and 2023/2024. This slowdown is tied to a shrinking formal employment footprint, which dropped from 15.7% of total employment in 2022 down to 15.5% in 2024, and 15.3% in 2025, according to the Economic Survey 2026.
Domestic VAT collections reached Ksh 355.255 billion, growing 8.5% year on year. Between January and April 2026, performance spiked to an average of 98.0% of target with a 15.5% growth rate, a sharp recovery from the first half of the fiscal year when growth averaged 8.5% and hit just 92.4% of target. Between May and June 2026, however, collections slowed down as substantial refunds were paid out to the oil sub sector following a policy shift that slashed the applicable VAT rate from 16% to 8%.
Corporation Tax maintained steady growth, rising 14.0% in FY 2025/2026 compared to 9.8% in FY 2024/2025 and 4.6% in FY 2023/2024, with total collection standing at Ksh 347.066 billion against a target of KES 365.249 billion. Nearly half, or 49.4%, of this tax was generated by five sectors, namely ICT, manufacturing, transportation, energy, and wholesale, which averaged a 25.0% growth in instalment remittances due to better corporate profitability.
Bank remittances also grew by 11.1%, making up 26.1% of the total Corporation Tax pie. Excise Tax on betting outperformed expectations, recording a Ksh 2.267 billion surplus and an impressive 115.9% performance rate. It brought in Ksh 16.527 billion against a Ksh 14.261 billion target, achieving a 24.9% growth rate, while Betting Tax and Withholding Tax on betting and gaming also surged by 20.3% and 59.2% respectively.
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Domestic Excise yielded Ksh 61.845 billion, with alcoholic beverages, including beer, wines, and spirits, dominating at 69.3% of total domestic excise, and tobacco products accounting for 14.9%. Collections under the Significant Economic Presence Tax, also known as the Digital Service Tax, doubled to Ksh 1.609 billion from Ksh 0.807 billion the previous year.
This tax applies to non-residents earning income via digital marketplaces in Kenya, and the Finance Act 2025 aggressively expanded the tax head by looping in all income earned via the internet or electronic networks and eliminating the previous Ksh 5 million minimum threshold.
As part of its digital transformation strategy to improve compliance and plug leakages, KRA continues to scale its technological framework. A major milestone includes the expansion of the Electronic Tax Invoice Management System, known as eTIMS, to boost VAT visibility, which successfully on boarded 750,915 taxpayers by June 2026.
System integrations between iTax and the Integrated Customs Management System have further unified domestic and customs data monitoring. This visibility paved the way for pre-populated tax returns, which automatically pull third party data to minimize filing errors and evasion. Additionally, the authority has utilized non-intrusive cargo scanners alongside AI powered data analytics to better detect illicit trade.
To make compliance faster and more user friendly, KRA launched several simplified solutions, including pre-populated returns, a WhatsApp chatbot, and a USSD short code, *222#, for quick registration, filing, and payment. Cross border traders also benefited from the rollout of the eCustoms mobile application, which has seamlessly reduced clearance costs. KRA scaled up its physical grassroots outreach via the Ushuru Mashinani program, partnering with 1,261 agents countrywide as of June 30, 2026, to provide localized assistance. Direct public dialogue was also championed through regional Citizen Assembly forums, allowing taxpayers to offer feedback and pitch process improvements directly to administrators.
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Other revenue collection measures included the Tax Base Expansion initiative, designed to recruit inactive or unregistered taxpayers, which brought in Ksh 9.1 billion through tactics such as on boarding landlords via the Block Management System, converting non-filers using third party data tracking, and updating tax obligations based on real income.
System integrations also allowed KRA to collect revenue instantly at the point of transaction. Linking tax systems with the Integrated Financial Management Information System introduced a 0.5% Withholding Income Tax on government supply contracts, offering total visibility over state procurement, while integrating 143 betting and gaming firms into the KRA network gave real time transaction access, helping betting taxes surpass fiscal targets.
Targeted follow ups on demand notices and tailored instalment payment plans successfully recovered Ksh 144.824 billion from non-compliant taxpayers. Upgrades to the Integrated Customs Management System allowed pre-arrival cargo processing using Bills of Lading, helping slash average cargo clearance times down to 42.30 hours, beating the 43.15 hour target, while compliance costs were minimized via mobile apps and professional standards were reinforced via body worn cameras on customs officers.
Emphasizing non adversarial resolution over lengthy court battles, KRA’s Alternative Dispute Resolution framework settled 993 tax disputes, successfully unlocking Ksh 35.062 billion. Revenue protection was also amplified via iWhistle, a secure web platform allowing the public to report tax fraud anonymously, a channel that recovered Ksh 3.2 billion across 908 reported cases, while high risk profiles continue to be monitored through intelligence led analytics.
Looking ahead to FY 2026/2027, KRA plans to deepen these systems reforms. Key priorities include expanding electronic invoicing, scaling real time revenue tracking through Electronic Tax Registers, implementing device identification tracking, and deploying a cross border information exchange system to mitigate international tax evasion.
Operational efficiency will be further backed by the launch of a Data Analytics Centre of Excellence, robust revenue assurance frameworks, and a broader rollout of artificial intelligence tools. These interventions aim to enhance voluntary compliance, improve the user experience, and create a highly transparent tax environment capable of supporting Kenya’s macroeconomic stability.
Despite a mixed and unpredictable economic climate in FY 2025/2026, Kenyan taxpayers demonstrated strong resilience, voluntarily fulfilling their tax obligations to drive the country’s ongoing economic transformation.
By Fredrick Odiero
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