Strategic reforms at the Kenya Revenue Authority’s (KRA’s) Domestic Taxes Department are beginning to yield significant results, with gross VAT collection reaching a historic monthly revenue of KES34.5 billion in January 2025.
This marks the first time this tax head has collected such a sum in KRA’s history after KRA collected KES30.6 billion in January 2024 which is second highest.
The VAT tax head began the second half of the 2024/2025 financial year on a strong note, surpassing its January target of KES33.995 billion by KES556 million, achieving a performance rate of 101.6%. This represents a 12.8% growth over the collection realized in a similar period in the financial year 2023/2024.
The VAT performance boost was largely driven by the energy sector, which saw a 121.6% increase in remittances from oil marketers. The manufacturing sector also contributed to the positive performance, with notable increases in remittances from producers of beer (10.5%), soft drinks (115.6%), tobacco (9.5%), sugar (121.5%), and wines & spirits (12.9%).
This positive revenue performance is attributed to several reforms, including the implementation of VAT Auto-Population of Returns, which has contributed to enhanced revenues. The auto-populated VAT return is a streamlined filing process where KRA pre-fills VAT returns with tax information from iTax, TIMS, eTIMS, and the customs business systems.
This process simplifies VAT return filing, improves compliance, and enhances the customer experience. The initiative represents a paradigm shift from manually preparing VAT returns through data analysis to pre-populating them with integrated data from KRA’s digital platforms, easing the burden on VAT registered taxpayers.
These reforms reflect KRA’s ongoing commitment to simplifying tax processes, as we simultaneously explore the potential of a fully web-based VAT return system and a taxpayer dashboard to provide real-time views of sales and purchases for each taxpayer.
These continued reforms will enhance transparency, efficiency and reduce the cost of compliance for taxpayers while enhancing revenue performance.
