The Kenya Revenue Authority collected KES 2.844 trillion in the financial year ending June 2026, a 10.6% jump that outpaces the 6.8% growth recorded the year before. On the surface this is a straightforward win for KRA, which has spent years missing targets. Look past the topline figure, though, and the numbers tell a more complicated story about where Kenya’s economy is actually generating money and where it is not.
Five sectors, manufacturing, energy, financial services, ICT, and wholesale trade, produced 62% of everything KRA collected, despite representing just 27.4% of nominal GDP. This gap indicates that a small group of formal, already-taxed businesses is shouldering the majority of the burden, while significant portions of the economy either remain outside the tax net or contribute much less than their size would imply.
Corporation Tax posted its strongest growth in three years at 14.0%, and banks alone accounted for 26.1% of that collection. Profitable, well-monitored firms continue to pay more. The rest of the economy, seemingly, is not catching up at the same pace.
That imbalance shows up most clearly in PAYE, the tax deducted straight from salaries. It grew only 6.7%, an improvement on the previous year’s 3.3% but still well below the 8.5% average KRA posted between 2022 and 2024.
KRA itself cites the same reason for this trend. Formal sector employment as a share of total employment has been sliding, from 15.7% in 2022 to 15.3% in 2025. Formal sector employment as a share of total employment slipped from 15.7% in 2022 to 15.3% in 2025. The decline itself is modest, a percentage point spread over three years rather than a collapse.
READ: KRA Tax Amnesty for 2026: Who Qualifies, How to Claim and Those Excluded
However, modesty is the point. A near-flat formal employment share means the economy is not creating enough new salaried jobs to keep pace with population and labor force growth, which points less to a shrinking job market than to a stalled one. Fewer new payslips are entering the tax net each year, and a tax head tied directly to salaries cannot grow much faster than the number of payslips being issued.
There is a similar wrinkle in domestic VAT. Collection grew 8.5% for the year, but KRA notes that between May and June 2026, oil sector taxpayers claimed substantial refunds after the applicable VAT rate on fuel dropped from 16% to 8%. That policy change, aimed at easing pump prices for consumers, directly dented one of KRA’s core revenue lines in the final stretch of the financial year. It is a reminder that tax policy decisions made for cost-of-living reasons ripple straight into collection figures months later.
KRA also highlighted progress on digital transformation whereby eTIMS onboarding reached 750,915 taxpayers as of June 2026, and the integration of 143 betting and gaming firms into KRA’s systems accompanied a 24.9% growth in betting excise. This came in 15.9% ahead of the target. The authority attributes these gains to expanded real-time visibility into transactions across both sectors.
The most interesting untold number in this release is the Significant Economic Presence Tax (SEPT), which doubled to KES 1.609 billion after the Finance Act 2025 scrapped the KES 5 million threshold for non-resident digital income. It is a small figure next to the trillions elsewhere, but it marks KRA’s clearest attempt yet to tax income generated by foreign platforms operating in Kenya without a physical presence. As more services move online, this is the tax head to watch, not because of its size today, but because of what it signals about where KRA expects future revenue to come from.
KRA had a good year by its own metrics. Whether that translates into a broader, healthier tax base depends on numbers the press release does not fully answer.
