The Kenya Revenue Authority (KRA) told the Finance and National Planning Committee that the 2025/2026 fiscal year will see a shortfall of KSh132.1 billion, which it links to revisions in customs oil duties, PAYE and VAT concessions.
KRA reported total collections of KSh2.844 trillion against a target of KSh2.977 trillion, achieving 95.6 per cent of the goal and marking a 10.6 per cent rise over the previous year.
Domestic tax receipts fell short of expectations, with KSh1.851 trillion collected versus a target of KSh1.991 trillion. PAYE contributions reached KSh598.8 billion, leaving a gap of KSh53.6 billion against the KSh652.4 billion target. VAT from domestic sources amounted to KSh355.3 billion, missing the KSh383.2 billion target by KSh27.9 billion.
The authority also pointed to disruptions in petroleum cargo movements caused by the conflict in the Middle East as a factor that reduced oil tax revenues.
To mitigate the shortfall, KRA is exploring alternative bio-fuel supplies from Japan, India, Malaysia and Singapore and intends to install smart meters and automatic tank-gauging equipment to improve fuel quantity reporting.
The agency said it will chase unpaid liabilities through pending government bill payments, focus on large employers and cross-check payroll data with third-party records to boost PAYE compliance.
For VAT, KRA plans to intensify anti-fraud actions, target taxpayers with an identified revenue potential of KSh56.1 billion and use financial information from Till Numbers and the Pochi La Biashara system to uncover undeclared income.
Committee members praised KRA for achieving its highest ever collection since establishment but urged better results next year. Committee chairperson Kuria Kimani said, “I wish to congratulate the Authority for recording the highest collection ever since its establishment,” adding that the authority should improve collections without further pressure on formally employed Kenyans.
