Parliamentary budget analysts have raised concerns over the government’s continued reliance on new taxes, arguing that the strategy has consistently failed to meet revenue expectations while generating public dissatisfaction.
The Parliamentary Budget Office (PBO) reported that in the last two fiscal years, the government fell short of its revenue projections by Sh342 billion, surpassing the additional revenue that the Kenya Revenue Authority (KRA) aimed to collect through new tax amendments.
The PBO, which provides technical guidance to Parliament on fiscal matters, said this shortfall highlights the need for a revised taxation approach that balances revenue growth with incentives for investment.
“The government has in recent years embarked on an ambitious strategy to expand the tax base and strengthen revenue collection through the annual tax amendment laws. But it has witnessed poor revenue collection and widespread public dissatisfaction of the introduction of new tax proposals,” the PBO report notes.
The office attributed the poor performance not only to public opposition but also to ineffective tax administration, weak enforcement, poor policy rollout, and compliance challenges. The years 2023/24 and 2024/25 saw the greatest public unrest over taxation, which coincided with major revenue shortfalls.
In 2023/24, the Finance Act 2023 aimed to generate Sh211 billion from tax amendments, but actual revenue missed the mark by Sh205 billion. The following year, the Finance Bill 2024 projected Sh346 billion in additional revenue, yet large-scale protests against perceived punitive taxes—including a June 25, 2024 storming of Parliament—forced the government to pass the Tax Laws (Amendment) Act 2024, targeting only Sh79 billion. Despite this adjustment, the government missed its revenue goal by Sh137 billion, leaving it reliant on borrowing to cover spending.
For the 2025/26 fiscal year, the government has shifted strategy with the Finance Act 2025, projecting Sh3.3 trillion in total revenue, including Sh30 billion from revised tax measures.
“The Act marked a strategic shift from previous tax amendment laws. Instead of imposing new tax burdens, it focused on strengthening revenue collection through administrative reforms and improved taxpayer compliance,” the PBO stated.
The office also expressed concern about the five percent withholding tax on withdrawals from betting and gaming wallets, warning it could drive bettors to unregulated platforms.
While the Treasury expects between Sh5.4 billion and Sh11.4 billion, the measure may discourage casual and small-scale players who risk losing part of their deposits without earning any profit.
“The Finance Act, 2025 introduced a five percent withholding tax on all withdrawals from betting and gaming wallets, a shift from the previous 20 percent tax levied only on actual winnings,” the report explained. T
he law empowers KRA to tax every withdrawal, whether it represents profit or the player’s original deposit.
“For example, if a player has deposited funds but decides to withdraw them without placing any bets, they could still face a five percent tax on that withdrawal, despite not earning any income,” the PBO added.
The office recommends that the government focus on enhancing tax administration and compliance rather than imposing new levies, arguing that repeated tax hikes have weakened public trust and hindered investment.