Corporate Tax Growth Outpaces PAYE as Company Profits Boost KRA Revenue

Corporate tax emerged as one of Kenya’s fastest-growing revenue sources in the 2025/26 financial year. The strong performance outpaced growth in Pay As You Earn (PAYE), reflecting improved company profitability despite a shrinking formal employment base.

Kenya Revenue Authority (KRA) collected Sh347.1 billion in corporation tax during the financial year ended June 2026, an increase of Sh42.2 billion from the previous year. The 13.9 percent growth marked the fastest expansion in three years, surpassing PAYE collections, which grew by 6.7 percent to Sh598.8 billion.

KRA attributed the rise in corporation tax to improved business profitability, stronger tax compliance and higher instalment payments from companies in the ICT, manufacturing, transport, energy and wholesale sectors. Together, these industries generated 49.4 percent of corporation tax revenue, while banks accounted for 26.1 percent after increasing their tax payments by 11.1 percent.

In contrast, PAYE growth remained modest as formal employment continued to decline, accounting for 15.3 percent of total employment in 2025 compared with 15.5 percent in 2024 and 15.7 percent in 2022. Workers also faced higher statutory deductions, including contributions to the Social Health Insurance Fund and the Affordable Housing Levy.

Meanwhile, proposed monthly tax relief of between Sh731 and Sh2,127 for employees earning up to Sh50,000 was left out of the Finance Bill 2026. However, Treasury Cabinet Secretary John Mbadi said the reforms would still be considered after a fiscal analysis.

Overall, KRA’s total revenue increased by Sh272 billion, or 10.6 percent, to Sh2.844 trillion. The growth was supported by a 12.4 percent increase in customs revenue, an 8.5 percent rise in domestic VAT, a 24.9 percent jump in betting excise tax and a doubling of Significant Economic Presence Tax collections following its expansion under the Finance Act 2025.