The Kenya Revenue Authority (KRA) has fallen short of its tax collection goal for the first six months of the 2025/26 financial year, raising concerns over the government’s ability to meet spending commitments without increasing debt or cutting essential projects.
Treasury records show KRA collected Sh1.161 trillion between July and December 2025, missing the Sh1.314 trillion needed to stay on track for its Sh2.627 trillion annual target.
This translates to 88.4 percent of the half-year goal, leaving a shortfall of Sh152.2 billion and putting additional pressure on public finances.
While collections grew compared to the same period last year, the pace remains below what Treasury projected to support the current budget. KRA’s performance mirrors last year’s trend, when it missed the mid-year target by Sh163.46 billion, collecting Sh1.07 trillion against a Sh1.23 trillion goal.
The 2024 shortfall was mainly blamed on the rejection of the Finance Bill, which forced the government to abandon key tax proposals.
This year, there were no major legislative disruptions, yet revenue mobilisation has continued to face challenges. Historically, corporate tax payments in the final months of the fiscal year tend to boost collections, offering some hope of narrowing the gap.
However, the Sh2.627 trillion target remains one of the most ambitious in recent years, and failure to achieve it could widen the fiscal deficit, forcing the government to borrow more or delay development projects.
Domestic borrowing has intensified, raising fears it could crowd out private sector credit, while external borrowing options remain constrained due to high national debt and tighter conditions in global financial markets.
The Parliamentary Budget Office (PBO) has repeatedly warned that relying on new taxes may not be a sustainable solution.
“Rather than relying on the introduction of new tax policies that are likely to create new tax burdens on Kenyans, the government may focus on improving tax administration through better enforcement of current tax policies, enhanced data analytics and increased use of technology to simplify tax processes and improve tax compliance,” the PBO stated in a previous review.
KRA has invested heavily in digital systems such as electronic invoicing and data matching tools to broaden the tax base. Despite these efforts, compliance remains uneven, especially among small and informal businesses that constitute a large portion of the economy.
President William Ruto’s administration has emphasized stabilising public finances while maintaining support for development spending.
