Kenya’s Overreliance on Few Firms for Corporate Tax Poses Fiscal Risk

Kenya’s corporate tax system is increasingly dependent on a small pool of companies, raising concerns about fiscal stability. Fresh data from the Kenya Revenue Authority shows that out of 618,201 registered firms, only 156,232 remitted corporate income tax in the year ending June 2025. This means nearly three quarters of companies did not pay any tax, exposing the Treasury’s overdependence on a limited group of contributors.

The small base of compliant firms contributed Sh304.8 billion in corporate tax, a 9.9 percent increase compared to the previous year. However, this growth was driven by the same narrow group of taxpayers, even as the proportion of firms failing to pay rose by 38 percent. Experts warn that such a structure is fragile because any downturn affecting key sectors could significantly weaken government revenues.

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This can arguably challenge lies in low compliance fueled by dormant firms, shrinking margins, and aggressive tax avoidance schemes. Many small and medium sized businesses report little or no profits, making it difficult to meet the 30 percent corporate tax requirement. This leaves the burden on a handful of large firms, mainly in banking, telecoms, and manufacturing.

KRA has responded by intensifying audits and rolling out data driven oversight to strengthen enforcement. The authority is also using analytics to detect irregularities and ensure that more firms are brought into the tax net. Even so, compliance remains concentrated, with large parts of the economy, including retail and real estate, contributing very little to corporate tax.

The Treasury faces added pressure as rising inflation, high borrowing costs, and delayed tax refunds strain businesses. Economists warn that unless Kenya widens its tax base, government finances could face significant shocks. They argue that relying heavily on a few companies for revenue is unsustainable and risks long term fiscal instability, especially as spending on infrastructure and social services continues to grow.