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Government fees prop up revenues as KRA falls Sh83bn short
A Huduma Centre in Nairobi CBD. A sharp rise in government service charges helped lift non-tax revenues in the quarter to September 2025 to Sh136 billion.
Income earned from fees and charges on government services rose by 28 percent in the three months to September, helping shore up State revenues as tax collections dwindled and the taxman failed to meet its targets for the quarter.
Appropriations in Aid (A-I-A), the money collected by State ministries, departments and agencies from the public for services they provide, increased by Sh29.5 billion to Sh136 billion in the first quarter of the 2025/26 financial year, up from Sh106.6 billion last year.
The surge supported a marginal rise in overall government revenues for the period, even though the Kenya Revenue Authority (KRA) missed its tax collection targets by more than Sh80 billion.
“The revenue collection was below target by Sh83.6 billion. This performance is attributed to underperformance recorded in ordinary revenue of Sh90 billion,” the National Treasury reported in its quarterly budget review for the period.
“The ministerial A-I-A collected amounted to Sh136.1 billion against a target of Sh129.8 billion, Sh6.4 billion above the target. The performance of A-I-A translated to a growth of 27.7 percent.”
The increase in A-I-A followed a rise in charges for several government services, including work permits, passes, national identification replacement and passports.
The Treasury had expected that growing non-tax revenues through the higher charges would raise enough funding to support the agencies and departments, reducing their reliance on the already strained exchequer.
Appropriations in Aid and investment income were the only revenue sources to surpass their targets in the three-month period, but not by enough to offset the shortfalls in other sources, including grants and tax revenues.
The government had expected to receive Sh4.4 billion in grants over the three months, but received only Sh2.9 billion, just over half of the projected amount, amid a global decline in official development assistance from wealthy countries and donors.
Overall, of the expected Sh793.2 billion in revenues for the period, the government managed to raise Sh709.6 billion, a modest 1.7 percent rise from last year’s Sh697 billion but underperforming by 10 percent.
KRA collected only Sh562.1 billion in taxes out of the expected Sh655.8 billion, missing targets for pay-as-you-earn (PAYE) and other income taxes, value added tax (VAT), excise duty and customs duties.
The largest shortfall was in tax revenues, especially payroll and corporate income taxes, where KRA missed targets by more than Sh65 billion, reflecting weaker than expected performance in companies and the labour market.
The taxman collected Sh136.6 billion in PAYE out of the expected Sh148.8 billion, Sh116 billion in other income taxes out of the expected Sh168.9 billion, and Sh73.8 billion out of the targeted Sh81.7 billion.
It also missed targets for import duty collections by Sh768 million, VAT by Sh13.2 billion and international trade taxes by Sh783 million.
Of the ordinary revenue sources, only investment income from State corporations surpassed its target, reaching Sh10.5 billion and exceeding the Sh6.8 billion forecast by Sh3.7 billion.
