NAIROBI, Kenya, Oct 28 – The Kenya Revenue Authority (KRA) has attributed a Sh132.1 billion revenue shortfall in the 2025/2026 financial year to changes in customs oil taxes, Pay As You Earn (PAYE) and Value Added Tax (VAT) concessions.

KRA told the National Assembly’s Finance and National Planning Committee that it collected Sh2.844 trillion against a target of Sh2.977 trillion, representing 95.6% of its target.

Despite missing its target, revenue collections grew by 10.6% compared to the previous financial year.

Domestic taxes accounted for a significant share of the shortfall, with KRA collecting Sh1.851 trillion against a target of Sh1.991 trillion.

PAYE collections stood at Sh598.8 billion against a target of Sh652.4 billion, leaving a deficit of Sh53.6 billion. Domestic VAT collections reached Sh355.3 billion against a target of Sh383.2 billion, resulting in a shortfall of Sh27.9 billion.

KRA also cited disruptions to petroleum cargo logistics linked to the conflict in the Middle East as a factor affecting oil tax collections.

To address the challenges, the authority said it was considering alternative sources of biofuels from Japan, India, Malaysia and Singapore. It also plans to deploy smart meters and automatic tank gauging systems to improve the accuracy of fuel quantity declarations.

KRA said it would pursue unpaid tax liabilities through government pending bill payments, target major employers and compare payroll records with third-party data to improve PAYE collections.

For domestic VAT, the authority plans to step up efforts to combat tax fraud, target taxpayers with an identified revenue potential of Sh56.1 billion and use financial data from Till Numbers and Pochi La Biashara to identify undeclared income.

Committee members commended KRA for recording its highest revenue collection since its establishment but called for improved performance in the next financial year.

Committee chairperson Kuria Kimani said the authority should improve collections without putting additional pressure on formally employed Kenyans.

“I wish to congratulate the Authority for recording the highest collection ever since its establishment. We, however, expect a better performance in the next Financial Year because we do not wish to have to raid payslips of those in formal employment further,” Kimani said.