Kenya's uncollected taxes balloon to Sh2.3 trillion as KRA struggles
These arrears are categorised by the Kenya Revenue Authority (KRA) as either under validation, uncollectable, or still undergoing reconciliation.
Kenya's tax system is under mounting strain as uncollected taxes have soared to a staggering Sh2.3 trillion, marking a more than twofold increase from the Sh999.6 billion reported the previous year.
The latest figures released by the Auditor-General point to substantial gaps in the collection of taxes, which could lead to serious financial implications for the country.
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According to the Auditor General’s report, a significant portion of the Sh2.3 trillion in uncollected taxes consists of Sh2.1 trillion in arrears.
These arrears are categorised by the Kenya Revenue Authority (KRA) as either under validation, uncollectable, or still undergoing reconciliation.
The report highlights various categories of debt, including Sh765.3 billion in legacy system debts, Sh906 million in customs uncollectable debts, and Sh231.6 billion in public sector debts.
The audit also points to a backlog in resolving disputes, with tax appeals standing at Sh391.8 billion and a further Sh138.6 billion tied up in validation processes.
In addition, another Sh588.5 billion in debts have been resolved but have not yet been updated in taxpayer ledgers.
While the rising tax arrears paint a concerning picture, the KRA’s struggle with achieving its tax revenue targets has added to the pressure.
Public and business frustrations continue to grow as many contend with a taxing system that has diminished their disposable income and business profits.
Furthermore, this situation has led to a surge in litigation cases, with many taxpayers challenging the KRA’s tax demands and its interpretation of the law.
In response to the mounting litigation and arrears, the KRA has sought to resolve some of these issues through arbitration and has even offered amnesty to certain taxpayers. These efforts are aimed at settling longstanding disputes and reducing the accumulation of penalties.
However, the KRA’s struggles with revenue collection have forced the government to revise its tax targets downward.
Initially, the Treasury aimed to collect Sh2.917 trillion in taxes for the 2024/25 fiscal year, but that target has been reduced by Sh516 billion, or 17.7 per cent, to reflect the reality of the current collection situation.
Despite the efforts to address the gaps, the long-standing accumulation of tax debts and the challenges facing the KRA remain a critical issue for the government.
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