Fresh data from the Kenya Revenue Authority (KRA) has revealed that three out of every four firms registered for corporate income tax failed to remit payments in the year to June 2025, raising fresh questions about Kenya’s corporate tax base.
According to KRA, only 156,232 of the 618,201 firms on the tax register made corporate tax payments, translating to a compliance rate of just 25.2 percent. This leaves 461,969 firms—approximately 74.7 percent—without remitting a cent on profitability.
The surge in non-compliance, up from 401,274 firms last year, points to a combination of persistent business losses, dormant companies, aggressive tax planning, and outright evasion. Tax experts warn that the gap cannot be explained by losses alone.
“Many companies may be loss-making, but the magnitude of the gap suggests more is going on than just economic downturns,” said Stephen Waweru, Senior Manager for Tax Services at KPMG. “Widespread avoidance, legal but aggressive planning, and transfer pricing are almost certainly part of the story.”
Analysts note that while some firms, especially SMEs and start-ups, are genuinely struggling with high inflation, rising costs, and supply chain disruptions, others remain dormant, having been registered largely to pursue government tenders.
At the same time, multinationals continue to exploit legal loopholes, using practices such as transfer pricing to shift profits to low-tax jurisdictions like Mauritius. This leaves the burden of corporate tax revenue disproportionately carried by a small pool of profitable firms in ICT, manufacturing, financial services, and retail.
In total, companies remitted Sh304.8 billion in corporate taxes in the year to June 2025, a 9.9 percent increase compared to the previous year. However, this growth was driven by a narrow segment of the economy.
To tackle the widening gap, KRA has turned to data-driven oversight. The authority is leveraging analytics through its iTax and eTIMS systems to detect inconsistencies, flag anomalies, and profile high-risk firms. “KRA leverages data analytics to identify trends and patterns that signal potential non-compliance,” said Alex Mwangi, acting commissioner for business strategy and technology.
The low compliance levels have reignited debate on Treasury’s controversial minimum tax proposal, which sought to tax companies on gross sales rather than profit. Though struck down in 2021, Treasury has indicated plans to redesign and reintroduce the levy as part of its Medium-Term Revenue Strategy.
For now, the revelation that three-quarters of firms remain outside the corporate tax net underscores the fragility of Kenya’s fiscal foundation.
