Reasons 461K Kenyan Companies Failed to Pay Taxes

Hello and welcome to the Money News Roundup Newsletter, where we cover three-quarters of companies failing to pay taxes, Kenyan taxpayers footing Ksh17 billion in questionable payouts, and eight banks increasing loan interest rates in defiance of a CBK directive.

Three-Quarters of Companies Fail to Pay Taxes

For the year ending June 2025, only 156,232 Kenyan companies paid corporate income tax (CIT), representing 25.2 percent of all companies operating in the country.

Data from the Kenya Revenue Authority (KRA) shows that 461,969 companies out of the 618,201 registered firms failed to meet their tax obligations despite intensified crackdowns by the taxman.

Experts told Business Daily that the failure to remit taxes goes beyond losses incurred by firms and the state of the economy. Stephen Waweru, KPMG’s senior manager for tax services, noted that while many companies file tax returns, few actually pay the taxes — suggesting that a significant portion of companies are loss-making. This could be attributed to high inflation, a volatile shilling, and rising input costs.

Some companies, though registered and holding PIN numbers, remain dormant, making them unable to remit taxes. Many are often registered solely to supply goods to government entities.

Additionally, multinational corporations have employed aggressive tax-planning strategies, exploiting legal loopholes to reduce their tax obligations — such as shifting profits to lower-tax jurisdictions like Mauritius.

A KRA official noted that the taxman is increasingly using data analytics to detect inconsistencies in the information companies supply to the iTax system, the Business Registration Bureau, and eCitizen.

Meanwhile, Daily Nation reports that Kenyan taxpayers will bear Ksh17.3 billion in payouts to contractors who are either bankrupt, facing corruption allegations, or struggling with debt. These payouts stem from court cases, some dating back to the Moi era.

Eight Banks Raise Interest Rates, Defying CBK Order

Eight commercial banks — DIB Bank Kenya, Consolidated Bank of Kenya, Co-operative Bank of Kenya, Kingdom Bank, UBA Kenya Bank, Diamond Trust Bank Kenya, Premier Bank Kenya, and Access Bank Kenya — raised their lending rates in the year to August, putting them at odds with the Central Bank of Kenya (CBK). According to Business Daily, the CBK has been urging lenders to lower borrowing costs in line with cuts in the benchmark Central Bank Rate (CBR), warning that non-compliant banks could face daily fines.

Between August 6 and August 12, the CBK cut the benchmark rate seven times, reducing it by a total of 3.5 percentage points to 9.5 percent, down from a 22-year high of 13 percent. So far, only six banks — Citibank N.A. Kenya, Absa Bank Kenya, Credit Bank, Standard Chartered Bank Kenya, Stanbic Bank Kenya, and Victoria Commercial Bank — have lowered their lending rates to match or beat the benchmark, underscoring the regulator’s struggle to enforce rate reductions across the sector.

Kenya’s Inflation Inches Up as Economy Grows 5%

Kenya’s annual inflation rose slightly to 4.6 percent in September, up from 4.5 percent in August, driven mainly by higher prices of food and non-alcoholic drinks (8.4%), transport (4.0%), and housing, water, electricity, gas and other fuels (1.4%), according to data from the Kenya National Bureau of Statistics (KNBS) reported by Citizen Digital. Month-on-month inflation stood at 0.2 percent, with the Consumer Price Index increasing to 146.56 from 146.21 in August. The Central Bank of Kenya continues to target a range of 2.5–7.5 percent to maintain price stability.

The economy grew by 5.0 percent year-on-year in Q2 2025, up from 4.6 percent in the same period last year, supported by robust growth in agriculture (4.4%), transportation and storage (5.4%), and finance and insurance (6.6%). Construction and mining rebounded sharply, expanding by 5.7 percent and 15.3 percent, respectively, while electricity and water supply rose by 5.7 percent compared to 1.2 percent last year. During the quarter, the Kenyan Shilling strengthened by 1.2 percent against the US Dollar but weakened against major global currencies and the Ugandan Shilling, while appreciating against the Tanzanian Shilling.

Trade Ministry Seeks Repeal of 17.5% Cement Levy – Business Daily

The Ministry of Investments, Trade and Industry is urging Parliament to repeal the 17.5 percent levy on clinker imports, citing disruptions in the steel and cement sectors since its introduction in July 2023. Trade Cabinet Secretary Lee Kinyanjui said many cement factories are operating below capacity because they lack access to locally produced clinker, while competitors who have the raw material often refuse to sell it. The ministry has written to the National Assembly to repeal the Export and Investment Promotion Levy, which it blames for the decline in the operations of steel and cement companies.

According to Business Daily, the levy was introduced to promote local clinker production, but the shortage of the key raw material has hurt domestic output and exports. Cement production fell by 763,500 tonnes (7.9%) in 2024, with domestic consumption dropping 7.2 percent. Exports to Uganda and Tanzania plummeted by 49.6 percent to 96,100 tonnes, while exports to other countries slipped from 263,600 tonnes in 2023 to 259,100 tonnes in 2024, according to the Kenya National Bureau of Statistics.

Privatisation of Kenya Pipeline Approved Amid Opposition Outcry

Parliament has approved a sessional paper on the privatisation of the Kenya Pipeline Company (KPC), where the government will retain a 35 percent stake. The motion, passed in just 28 minutes, drew sharp criticism from opposition MPs led by Deputy Minority Leader Robert Mbui, who accused the House leadership of sneaking the proposal into a supplementary order paper and called it an ambush by the Executive. The opposition has vowed to challenge the decision in court, arguing that the legislative process was compromised.

According to The Standard, the government plans to privatise 65 percent of KPC through an initial public offering at the Nairobi Securities Exchange, while prioritising the settlement of pending lawsuits worth Sh15.75 billion. National Assembly Majority Leader Kimani Ichung’wah said the move would allow private investors to buy shares while the state retains significant control. The Treasury expects to raise about Sh100 billion from the sale.

RwandAir Launches Zanzibar-Mombasa Route After 6-Year Hiatus

RwandAir has launched a new Zanzibar-Mombasa route, operating four flights weekly and linking Kigali with two of East Africa’s top tourist destinations. The flights, served by a Boeing 737, mark the airline’s return to Mombasa after a six-year break and are part of its strategy to position Kigali as a competitive regional hub. According to Business Daily, RwandAir says the move will expand opportunities for both leisure travellers and regional commerce, strengthening East Africa’s global travel and trade corridors.

The new route will face competition from Kenya Airways and its low-cost subsidiary Jambojet, which already operate several weekly flights between the two destinations. Mombasa, traditionally Kenya’s gateway to the Indian Ocean, has been forced to reinvent itself amid rising competition from Zanzibar’s aggressively marketed resort economy. Other competitors on the coastal routes include Precision Air, Air Tanzania, and Ethiopian Airlines.