Ruto signals major shifts in government’s next phase of tax reforms

President William Ruto has said the government’s next phase of tax reforms will focus on expanding the tax base fairly by bringing more Kenyans and businesses into compliance without burdening those who already pay.

Speaking at the annual Taxpayers’ Dinner at State House, Nairobi, Ruto said fairness must anchor the government’s revenue strategy as Kenya seeks to strengthen public services, seal leakages, and reduce pressure on compliant taxpayers.

Ruto said the biggest imbalance in Kenya’s tax system is the “deep gap” between the small group that pays and the millions who remain outside the tax net. 

According to the President, three million Kenyans in formal employment contribute about Sh600 billion annually, while 17 million registered taxpayers contribute only Sh17 billion. 

He described this as a structural gap the government intends to close through simplified processes, better support and respect for small taxpayers.

MSMEs “an opportunity, not a burden”

Ruto highlighted micro, small and medium enterprises as the country’s largest untapped revenue segment.

Although MSMEs contribute 33% of Kenya’s GDP and employ close to 15 million people, they account for just 1% of tax revenue.

To change this, the Kenya Revenue Authority has created a new Micro and Small Taxpayers Department to serve the 1.2 million MSMEs currently in the tax base and onboard an additional five million. 

The President said the unit will offer personalised support, simpler compliance steps and technology-driven tools to make tax payment easier.

“This new department will help expand our tax base, ensuring everyone shares the responsibility of nation-building,” he said.

Digital systems to make compliance easier

Ruto said the government is now relying heavily on technology to widen compliance fairly rather than through “pressure or punishment”.

He cited several recent changes:

• KRA services integrated into eCitizen, reducing compliance time for individuals and MSMEs by more than 40%.

• Over 1,000 developers are building applications on the state API ecosystem, Gava Connect.

• AI-powered risk engines are being piloted within customs and domestic tax systems.

• A record Sh85 billion in customs revenue was collected last month.

• Domestic VAT rising from Sh20 billion in 2021/22 to Sh28 billion this year.

• A new electronic rental income tax system targeting Sh80 billion annually, up from the current Sh14 billion.

• KRA services are now available through WhatsApp and USSD, making payments accessible to more Kenyans.

“This is more than technology. It is a government that listens, responds and serves,” he said.

“Every shilling must show value”

The President said expanding the tax base fairly is only one part of the reform agenda. He added that taxpayers must also see visible results from every shilling collected.

He said fiscal reforms now underway aim to seal leakages, cut wasteful spending and redirect resources to projects with the highest social and economic return, including education, healthcare and infrastructure.

Ruto acknowledged ongoing economic pressures linked to shifting global trade, climate impacts and fiscal constraints, but said Kenya had posted a 9.1% revenue increase in the second half of the last financial year, signalling resilience.

“Our success is not measured by revenue targets but by transformed lives, a job for a young person, a market for a farmer, growth for a business,” he said.

Pledge to support KRA

Ruto praised KRA for what he called a “phenomenal” performance and pledged continued government support, including increased funding to modernise operations and improve compliance services.

He said fairness, respect and integrity must define Kenya’s tax culture going forward.

“Nation-building depends on a simple partnership: citizens who contribute and institutions that serve with integrity,” Ruto said.

He also called on more Kenyans to join the tax net as the country marks 30 years of KRA and 20 years of Taxpayers’ Day.