By Erestinah Jane, July 12, 2026
The Kenya Revenue Authority (KRA) is increasingly turning to technology and data-driven tax administration as it seeks to bridge revenue collection gaps while avoiding measures that could place additional pressure on businesses and households.
The challenge comes as the tax authority works to meet ambitious national revenue targets needed to finance government expenditure and support public debt obligations, even as businesses grapple with rising operating costs and a difficult economic environment.
KRA faces the difficult task of increasing domestic revenue collection without adopting enforcement measures that could discourage investment, reduce business growth or push more enterprises into the informal economy.
Among the major obstacles affecting tax collection is the decline in corporate profitability, with many businesses reporting shrinking profit margins due to high production costs, increased taxation and a challenging business climate.
The reduced profitability has in turn affected Corporate Income Tax (CIT) collections, as companies generate lower taxable profits compared to previous years.
Consumer spending has also remained under pressure as households contend with a higher cost of living and reduced disposable income. The slowdown in consumption has affected Value Added Tax (VAT) and excise duty collections, two of the government’s key revenue streams.
Another significant challenge remains the size of Kenya’s informal economy, where millions of businesses operate outside the formal tax system.
Because many informal enterprises are not fully registered or do not maintain formal financial records, they remain difficult to track, audit and tax effectively, limiting the government’s ability to broaden the tax base.
To address these challenges, KRA is increasingly shifting its focus from aggressive enforcement to technology-enabled compliance aimed at improving efficiency and encouraging voluntary tax compliance.
A key pillar of this strategy is the continued rollout of the Electronic Tax Invoice Management System (eTIMS), which enables the authority to monitor business transactions in real time and strengthen oversight of VAT compliance.
The system is expected to reduce tax evasion, improve transparency in commercial transactions and help detect fraudulent claims for VAT refunds.
KRA is also expanding the use of advanced data analytics by integrating information from multiple third-party platforms, including financial institutions, utility providers and digital payment systems.
Through these integrations, the authority aims to identify discrepancies in taxpayer declarations, detect non-compliance more accurately and improve audit efficiency while reducing reliance on manual inspections.
At the same time, the tax agency has intensified taxpayer education programmes targeting Micro, Small and Medium Enterprises (MSMEs).
The initiatives seek to simplify tax procedures, improve understanding of tax obligations and encourage voluntary compliance rather than relying primarily on punitive enforcement measures.
KRA has also continued to support structured tax amnesty programmes and other compliance initiatives designed to allow eligible taxpayers to regularise their tax affairs without facing excessive penalties.
Economists say striking the right balance between raising revenue and supporting economic growth will remain one of KRA’s biggest challenges, particularly as the government seeks to expand domestic resource mobilisation while protecting businesses from excessive tax burdens.
As Kenya continues implementing fiscal reforms, technology is expected to play an increasingly central role in strengthening tax administration, improving compliance and enhancing revenue collection without imposing new tax shocks on businesses and consumers.
