KRA Introduces New Method to Recover Unpaid Business Taxes

Businesses waiting years to be paid by government agencies could soon see part of that money diverted to the taxman, as the Kenya Revenue Authority (KRA) considers using state debt to recover outstanding taxes.

The proposal appears in KRA’s submission to the National Assembly’s Finance and National Planning Committee, which lists it among strategies to improve revenue collection.

Under mitigation measures for large and medium taxpayers, the authority proposes to “use settlement of Government pending bills to recover outstanding tax liabilities.” KRA would identify taxpayers with tax debts among suppliers awaiting payment from government agencies and recover the amounts through the settlement process.

According to the Treasury, the government owes businesses about Ksh175 billion, with some payments delayed for years and businessmen protesting the wait.

The push comes as KRA faces pressure to raise more revenue. In the financial year ending June 30, it collected Ksh2.844 trillion against a target of Ksh2.977 trillion, missing the mark by Ksh132.1 billion.

To support enforcement, KRA is deploying technical teams to match data from third-party systems, including the Integrated Financial Management Information System (IFMIS), with its tax records, and to convert any discrepancies into additional revenue.

It is also pursuing withholding tax reconciliations on payments for goods supplied to government entities and corporate buyers. A separate system is being rolled out to offset approved tax refunds against outstanding liabilities.

The submission also reveals that KRA itself had pending bills of Ksh5.58 billion as of June 30, 2026. The largest share, Ksh4.34 billion, is owed for Excise Goods Management System stamps.

A further Ksh829.59 million is owed following a court settlement involving Habimana Sued, while Ksh416.36 million is owed to the Administration Police Service for security services.

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