Inside KRA’s plan to close Ksh1.1T budget deficit through tax amnesty
By Aloys Michael, July 4, 2026The Kenya Revenue Authority (KRA) has unveiled a six-month tax amnesty programme aimed at boosting revenue collection as the government races to narrow a projected Ksh1.1 trillion budget deficit in the 2026/27 financial year.
The initiative, which began on July 1, 2026, offers taxpayers up to a 100 per cent waiver on penalties, interest and fines attached to tax debts accumulated up to December 31, 2025. However, the relief does not apply to tax liabilities arising after that date or to cases currently before the courts.
According to KRA Commissioner General Adan Mohamed, taxpayers involved in active legal disputes are encouraged to use the authority’s Alternative Dispute Resolution (ADR) framework to settle outstanding principal taxes and qualify for the amnesty.
The programme will run until December 31, 2026, with KRA urging eligible taxpayers to take advantage of the window before the deadline.
“This initiative is part of the government’s broader commitment to foster voluntary tax compliance and provide financial relief,” KRA said in a statement.
The amnesty comes at a critical time as the government seeks to increase domestic revenue instead of relying heavily on borrowing to finance its spending.
The National Treasury has projected total government revenue of Ksh3.63 trillion in the current financial year, with KRA expected to collect Ksh3 trillion in ordinary revenue.
Treasury Cabinet Secretary John Mbadi recently said improving tax collection is one of the government’s main strategies for addressing the country’s widening fiscal gap.
Mbadi on budget deficit
Speaking ahead of the 2026/27 Budget presentation, Mbadi said Kenya still has significant room to increase revenue without introducing major new taxes.
“There are still opportunities under revenue collection and domestic revenue mobilisation because we still believe that KRA is not performing optimally. Remember, there was a time when we were collecting about 18 per cent of GDP. Now it has come down to just slightly over 14 per cent,” he said.
According to Mbadi, the falling tax-to-GDP ratio points to weaknesses in tax administration rather than a lack of economic activity.
He said KRA is strengthening intelligence-led enforcement to identify businesses and individuals operating in the informal and digital economy who should be paying taxes but remain outside the tax system.
“We must devise strategies for collecting taxes from businesses which have maybe moved more informal or more digital. That is why you see us talking about using intelligence to bring in people who actually are supposed to pay tax and are not paying,” Mbadi explained.
The Cabinet Secretary defended stricter tax enforcement, saying every eligible taxpayer must contribute fairly to support government services and reduce dependence on debt.
Under the new amnesty programme, taxpayers who had already cleared their principal tax liabilities by December 31, 2025, will automatically receive a full waiver of outstanding interest and penalties without submitting an application.
Taxpayers with no principal tax due but facing late filing penalties will also qualify for automatic waivers once they submit all outstanding tax returns.
Those with unpaid principal tax can still benefit by settling the full amount during the amnesty period, after which KRA will immediately waive all related penalties and interest.
For taxpayers unable to pay in one instalment, KRA has introduced structured payment plans through the iTax platform. Eligible taxpayers must, however, clear all principal taxes under the agreement by December 31, 2026, to qualify for the waiver.
KRA said the latest initiative builds on the success of two previous tax amnesty programmes, which recovered Ksh80.9 billion in principal tax payments while helping thousands of taxpayers regularise their tax records.
The authority believes the renewed programme will improve voluntary compliance, broaden the tax base and generate additional revenue needed to support government spending without increasing Kenya’s already rising debt burden.
With borrowing becoming more expensive and global financing conditions remaining tight, the success of the tax amnesty is expected to play an important role in determining whether the government can meet its ambitious Ksh3 trillion revenue target and reduce pressure on the country’s finances.