Kenya Revenue Authority (KRA) is set to receive Ksh600 million in the Financial Year 2025/26 to modernise its tax administration systems using artificial intelligence (AI), data analytics, and machine learning.

This is part of government efforts to tighten tax compliance and expand the country’s revenue base.

According to the Parliamentary Committee on Finance and National Planning, the allocation is specifically earmarked to upgrade KRA’s core tax administration system, improve cybersecurity frameworks, and establish real-time data collection capabilities to detect tax evasion more effectively.

“The allocation will go towards modernising KRA’s systems by upgrading its core tax administration platform and enhancing cybersecurity. This will improve service delivery, reduce compliance costs, and detect tax evasion using modern data technologies,” the Committee said in its budget review report.

The investment comes at a time when the government is under pressure to raise more domestic revenue to fund its development agenda, reduce reliance on debt, and meet growing public expenditure demands.

The use of AI and machine learning is expected to transform how the tax authority operates by enabling real-time data processing, identifying unusual patterns in taxpayer behaviour, and flagging suspicious transactions that may indicate non-compliance or fraud.

KRA officials have previously highlighted the need to enhance data-driven tax enforcement by moving beyond traditional audit methods.

The integration of AI technologies is also expected to improve taxpayer segmentation, automate risk profiling, and customise compliance interventions—measures that are likely to increase revenue without necessarily raising taxes.

“By leveraging AI and big data analytics, KRA will be better positioned to detect evasion, minimise human error in audits, and streamline operations across domestic and customs revenue channels,” the Committee noted.

Over the years, KRA has implemented several digital reforms, including the iTax system and the Electronic Tax Invoice Management System (eTIMS).

However, the authority says the next phase of modernisation requires deeper integration of advanced technologies to respond to increasingly sophisticated tax evasion tactics.

The Ksh600 million investment will also strengthen cybersecurity defences, a critical component as tax systems become more interconnected and exposed to digital threats.

Enhancing the protection of taxpayer data will build public confidence and safeguard the integrity of Kenya’s digital tax infrastructure.

In terms of recent performance, KRA collected Ksh2.112 trillion in the 10 months leading up to April 2025, a 6.1 per cent increase compared to the same period in the previous fiscal year.

This represents a 96.5 per cent achievement of the projected Ksh2.189 trillion target.