The Kenya Revenue Authority (KRA) is stepping up efforts to identify undeclared income among small businesses and landlords, planning to use financial data, payroll records, and property information to track taxpayers who may not be meeting their tax obligations.
In a report presented to the National Assembly’s Finance and Planning Committee, KRA outlined measures it intends to use to address revenue shortfalls, including analysing data from Till Numbers and Pochi la Biashara to identify income that businesses have not declared.
The authority also plans to match employer and payroll records with third-party data to address gaps in Pay As You Earn (PAYE) collections among micro and small taxpayers.
Landlords are also in focus, with KRA reporting that it has identified one million property owners and plans to use its eRITS fusion engine to identify those who are not complying with rental income tax requirements.
KRA Misses VAT and PAYE Targets
The proposed measures follow KRA’s shortfall in domestic Value Added Tax (VAT) and PAYE collection targets between July and September 2026.
During the three months, the authority collected KSh 98.2 billion in domestic VAT, missing its target by KSh 2.6 billion.
PAYE collections stood at KSh 154.9 billion, falling KSh 7.3 billion below the target.
The two tax heads recorded a combined shortfall of KSh 9.9 billion over the period.
KRA plans to address the gaps through targeted compliance checks, debt recovery and the use of financial and payroll information to identify potential underpayments.
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How KRA Plans to Track Small Businesses
For micro and small taxpayers, KRA intends to use financial information, including transactions processed through Till Numbers and Pochi la Biashara, to identify income that may not have been declared in tax returns.
The authority also plans to prioritise taxpayers whose records indicate possible discrepancies between their reported income and other available data.
According to the report, KRA has identified a potential of KSh 56.1 billion among priority micro and small VAT taxpayers from July 2025 to date.
The authority plans to focus on taxpayers with discrepancies between electronic invoicing records and tax returns, non-filers and taxpayers with high VAT credit balances.
The report indicates that high-credit taxpayers account for 42 per cent of the VAT register.
KRA is also targeting employers who fail to remit PAYE deducted from employees’ salaries.
Its proposed measures include matching payroll information with third-party records, targeting high-value employers and following up on PRWPs and other non-remitters.
The report puts the amount associated with PRWPs and non-remitters at KSh 5.3 billion from July 2025 to date.
For large and medium taxpayers, KRA plans to use the settlement of government pending bills to recover outstanding tax liabilities while strengthening the monitoring of tax returns and payments.
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Landlords Face Increased Scrutiny as KRA Targets More Tax Heads
Property owners are another group the planned compliance measures target.
KRA intends to use the eRITS fusion engine to identify landlords who are not meeting their rental income tax obligations.
The authority says it has identified one million property owners and plans to recruit landlords through targeted, data-driven approaches while closely monitoring Revenue Service Assistants.
The strategy is intended to help the authority identify property owners who may not be declaring rental income and improve compliance in the rental property sector.
KRA’s proposed measures extend beyond VAT, PAYE and rental income tax.
For corporation tax, KRA plans to offset approved tax refunds against outstanding liabilities, pursue high-value restructuring and transaction cases, and conduct intelligence-led audits and compliance reviews.
It also intends to reconcile withholding income tax payments on the supply of goods and use third-party information, including financial and government payment records, to identify discrepancies.
In the excise tax sector, KRA plans to strengthen enforcement and conduct audits targeting telecommunications companies and financial institutions.
It will also monitor betting operators’ integrated systems and analyse transaction data to identify inconsistencies that require follow-up.
For the housing levy, the authority plans to reconcile employment and payroll data and pursue employers with employees but low or no remittances.
The taxman also intends to strengthen investigations and revenue protection by prioritising intelligence on sectors considered vulnerable to revenue losses.
Fuel Taxes and Customs Also in Focus
KRA plans to use smart meters at fuel storage facilities, outlets and depots to verify the quantities declared for petroleum cargo.
The authority also intends to collect all outstanding electronic slips in Nairobi and other regions.
In addition, it plans to source biofuels from Japan, India, Malaysia and Singapore as alternative supply options amid disruptions and uncertainty linked to the conflict in the Middle East.
Other proposed measures include optimising delivered vessels and localising transit products.
The authority is also pursuing measures to recover revenue tied up in tax disputes and unpaid liabilities.
These include strengthening inter-departmental engagement to resolve cases under Alternative Dispute Resolution (ADR), encouraging taxpayers to use the tax amnesty programme, and expediting cases pending before courts and the Tax Appeals Tribunal.
KRA also plans to prevent the dissolution of companies with outstanding tax debts, support firms in liquidation or administration, and recover tax debt through securities placed on property.
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