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The Kenya Revenue Authority (KRA) has fallen short of its July tax collection target by Ksh 20.1 billion, raising concerns about the government's ability to fund its ambitious economic agenda and meet fiscal commitments. This shortfall could impact public debate and policy execution in the near term.
The Kenya Revenue Authority (KRA) missed its tax collection target for July by Ksh 20.1 billion, a revelation by the National Treasury that casts a shadow over President William Ruto's economic plans. This deficit raises questions about the government's capacity to finance its key promises under the Bottom-Up Economic Transformation Agenda (BETA) ahead of the 2027 polls.
This recent underperformance follows a trend of missed targets by the KRA. For the Financial Year 2023/2024, the KRA missed its revenue target by Ksh 130 billion, collecting Ksh 2.407 trillion against a revised target of Ksh 2.537 trillion. The original target for that period was Ksh 2.768 trillion. Similarly, in the first half of the Financial Year 2024/2025 (July to December 2024), the KRA reported a shortfall of Ksh 163.46 billion, collecting Ksh 1.07 trillion against a target of Ksh 1.23 trillion.
Despite these monthly and half-yearly shortfalls, the KRA announced in July 2025 that it had surpassed its overall revenue target for the Financial Year 2024/2025, collecting Ksh 2.571 trillion against a target of Ksh 2.555 trillion. This represented a 6.8% growth in revenue compared to the previous financial year. The KRA attributed this growth to enhanced compliance initiatives, digitalisation of revenue administration, and strategic interventions such as the integration of betting and gaming companies into the tax system.
However, domestic revenue collection for FY 2024/2025 still fell short, reaching Ksh 1.688 trillion against a target of Ksh 1.721 trillion, a performance rate of 98.1%. Customs revenue, on the other hand, exceeded its target, collecting Ksh 879.329 billion against a target of Ksh 830.368 billion.
The government's fiscal policy for FY 2025/2026 aims to reduce the fiscal deficit and avoid new taxes, focusing instead on broadening the tax base and enhancing collection efficiency. The total projected revenue for FY 2025/2026, including Appropriation-in-Aid, is Ksh 3.32 trillion. The Finance Bill, 2025, aims to generate an additional Ksh 30 billion through enhanced tax administration rather than new taxes.
Economic indicators influencing revenue collection include a projected GDP growth of 5.3% in both 2025 and 2026, supported by stabilised inflation and cautious monetary easing. However, challenges such as high bank lending rates and a slowdown in private sector activity have impacted revenue mobilisation.
Analysts suggest that consistent failure by the KRA to meet targets contributes to increased taxes as the government struggles to fund its budget. The National Treasury has indicated a commitment to protecting Kenyans' disposable income, with tax relief contingent on consistent target achievement by the KRA.
The persistent revenue shortfalls pose a significant risk to the government's fiscal stability and its ability to implement development projects. This could lead to increased borrowing, either domestically or externally, to bridge the funding gap. The Treasury's commitment to avoiding new taxes in the FY 2025/2026 budget, while aimed at public relief, places greater pressure on the KRA to enhance collection efficiency and broaden the tax base. Failure to meet these revised targets could necessitate difficult fiscal adjustments in the future.
The specific measures the KRA will implement to address the July 2025 shortfall and ensure future targets are met remain to be fully detailed. The long-term impact of policy shifts, such as the adjustment of Social Health Insurance Fund (SHIF) and Housing Levy deductions, on overall income tax collection is still being assessed.
Observers will be closely monitoring the KRA's strategies to enhance tax compliance and administration, particularly in light of the government's commitment to avoid new taxes in the upcoming fiscal year. The performance of key economic sectors and the impact of global economic factors on Kenya's revenue collection will also be crucial indicators of the country's fiscal health.
Kenya's National Treasury, Kenya Revenue Authority (KRA), Bottom-Up Economic Transformation Agenda (BETA), Fiscal Policy, National Budget.
