Kenyan taxpayers and businesses are likely to face a tougher tax collection environment as the government moves to meet ambitious revenue targets outlined in the 2026/27 Budget, according to Deloitte East Africa Tax and Legal Partner Fred Omondi.
Although this year’s Finance Bill avoids major or politically contentious tax increases, Omondi notes that the real pressure is expected to come through intensified enforcement rather than new tax measures.
He cautions that Treasury’s revenue assumptions appear optimistic given ongoing shortfalls in collections, potentially pushing the Kenya Revenue Authority (KRA) to step up audits, assessments and recovery actions to close the gap.
The Budget projects tax revenue of about KSh2.9 trillion, with an additional KSh600 billion expected from Appropriations-in-Aid, bringing total anticipated revenue to roughly KSh3.5 trillion.
Omondi observes that this target closely mirrors projected recurrent expenditure, also estimated at around KSh3.5 trillion, leaving the fiscal framework highly sensitive to any revenue underperformance.
He warns that if collections fall short, the government may be forced to borrow in order to finance routine spending.
The risk is compounded by a familiar pattern in recent years where initial spending plans are expanded through supplementary budgets, often widening the fiscal deficit beyond original estimates.
According to him, weaker-than-expected revenue performance combined with rising expenditure would likely deepen fiscal pressure and intensify reliance on existing taxpayers rather than introducing new taxes.
At the centre of this shift is an increasingly data-driven enforcement model, with KRA leveraging systems such as the Electronic Tax Invoice Management System (eTIMS) to cross-check taxpayer declarations against real-time commercial data.
Proposed Finance Bill amendments would further widen the digital compliance net, bringing more small businesses into formal reporting structures.
Omondi stresses that firms must maintain accurate and timely records, warning that inconsistencies between declared figures and KRA data will become increasingly difficult to defend.
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He also notes that KRA is expanding its reliance on multiple data sources, meaning discrepancies are more likely to trigger scrutiny or enforcement action.
The new framework also includes proposals that would strengthen the authority’s ability to recover disputed taxes, potentially allowing enforcement to proceed even while objections are still being reviewed.
Tax experts argue this shift could alter the balance between revenue collection efficiency and taxpayer protections.
Small and medium-sized enterprises are expected to be most affected, as many lack the systems required to comply with increasingly digitalised tax requirements, yet will still be subject to the same obligations as larger firms. Proposed changes may also remove certain exemptions that previously shielded smaller businesses from full eTIMS compliance.
As KRA expands access to transaction data, mobile money records and possibly banking information, concerns are growing around data protection, storage and usage.
Omondi notes that authorities have assured stakeholders of confidentiality and restricted use for tax administration purposes, but he cautions that cybersecurity risks remain significant, particularly given past vulnerabilities in both public and private digital systems.
