The Kenya Revenue Authority (KRA) has announced a big win in its 2024/25 fiscal year revenue collection, registering a 6.8% increase that pushed total collection to Ksh2.57 trillion.
KRA surpassed its Ksh2.555 trillion collections target, recording a performance level of 100.6%, surpassing the Ksh2.41 trillion that it had raised in the last financial year.
Suspension of the Finance Bill 2024, however, affected local collections, which were below the target of Ksh1.72 trillion to Ksh1.68 trillion. The taxman, however, managed to compensate for the shortfall in other areas where there was good performance.
One of such areas was revenue from exchequer, which rose by 4.5% to Ksh2.32 trillion from Ksh2.22 trillion last year. This translated to a 99% performance rate against the Ksh2.34 trillion target.
Revenue Growth Despite Headwinds
The strong showing came in the face of strong economic headwinds, particularly in the first half of the year (July–December). Tight banking lending rates, foreign trade tensions, and global rows all slowed business activity. These were compounded by public outrage against the Finance Bill, which was eventually withdrawn.
The economic impact was visible in trade performance. The growth in imports stagnated, rising only 0.04%, due to steep declines in fuel and lubricants (-16.4%) and food and beverages (-14.6%). Exports dropped by 2%, driven primarily by the decline in horticulture (-2.5%) and tea (-15.4%).
Credit access was also tight because commercial banks kept lending rates up, further tightening the private sector and dampening investment.
Yet, KRA regained its footing in the second half of the year.
“Notwithstanding these challenges, KRA’s robust measures yielded a significant revenue collection turnaround in the second half of the financial year. Revenue grew by 9.1 per cent compared to the 4.5 per cent growth recorded in the first half of the financial year,” said Commissioner General Humphrey Wattanga.
Customs, VAT and Betting Lead Revenue Gains
Collections at the customs beat targets as KRA collected Ksh879.33 billion against a target of Ksh830.37 billion, which is a performance rate of 105.9%. This is an improvement of 11.1% over last year, a fact that indicates that Kenya is a net importer of goods, most of them from China.
Collections of local VAT also rose to Ksh327.3 billion, a 4.2% increase from the same period last year. VAT collections in the second half of the year were Ksh178.96 billion, up from the first half’s Ksh148.37 billion. Wattanga said this was due to increased compliance efforts, including the tightening of VAT registration checks and confirmation of declarations.
The gambling sector turned out to be a surprising star performer. Excise tax from betting activities brought in Ksh13.23 billion, exceeding the target by Ksh1.95 billion. Betting tax also posted strong numbers, collecting Ksh5.7 billion against a target of Ksh5.4 billion, a sign that the sector is now a consistent revenue stream.
Mixed Results in Income and Corporate Taxes
Pay As You Earn (P.A.Y.E) collections reached Ksh560.9 billion, reflecting a modest 3.3% growth. KRA attributed the slow pace to a weak formal job market, as both public and private sectors scaled back hiring due to economic uncertainty.
The growth in PAYE was also dampened by taxpayers using adjustment vouchers to offset their liabilities and policy shifts, including the reclassification of the Social Health Insurance Fund (SHIF) and Housing Levy as deductible allowances instead of tax reliefs.
Corporation tax fell short of expectations, bringing in Ksh304.8 billion against a Ksh321.08 billion target. The bulk of this revenue came from Kenya’s major sectors – ICT, finance, real estate, manufacturing, and wholesale and retail.
On the other hand, domestic excise tax closed the year at Ksh69.38 billion, with beer and tobacco manufacturers posting a decline in revenue of 13.9% and 8.9% respectively. KRA blamed the decline on counterfeit and illicit trade, which still haunt excise-sensitive industries.
In a bid to counter this, the authority pledged to boost compliance enforcement, particularly in sectors under threat from illegal trade.
Eyes on 2025/26 Target
Looking ahead, KRA has a still more daunting task of raising Ksh2.75 trillion in the 2025/26 budget year to help finance Kenya’s Ksh4.3 trillion national budget.
As economic pressures are also poised to persist, the authority will rely on a combination of policy reforms, technology adoption, and compliance enforcement to achieve this goal and keep Kenya’s fiscal juggernaut on the move.
The taxman has embraced technologies like the Electronic Tax Invoice Management System (eTIMS), which has significantly reduced VAT fraud, boosted tax compliance, and made it easier for businesses to file and pay VAT. The system has also helped widen the tax base and increase overall revenue collection.
