Thousands of taxpayers were granted penalty waivers on Sh4.76 billion owed to the Kenya Revenue Authority (KRA) in breach of amnesty rules, raising questions on the handling of the scheme.
The Auditor-General’s report on the KRA for the year to June 2025 shows that 4,677 taxpayers ben-efited from the scheme without having a repayment plan for the billions of shillings owed in principal taxes.
The audit shows the taxpayers, including individuals and businesses, were forgiven Sh290.48 million penalties and interest, marking a breach of the law since they had not settled the principal taxes.
The report notes that the KRA breached the Tax Procedures (Amendment) Act, 2024, which sets conditions for forgiveness of penalties and interest, including the requirement that one must have fully settled the principal tax or shared a repayment plan.
KRA staff have been previously accused of helping to fraudulently clear cargo and alter records to help people dodge tax payments, leading to revenue losses.
The tax amnesty scheme was aimed at boosting revenues amid pressure on the KRA to weed out tax evaders and raise collections through increased compliance.
‘Review of the tax amnesty uptake indicated that it was granted on penalties, interest and fines of Sh290.48 million to 4,677 taxpayers, despite the taxpayers owing the authority Sh4.75 billion in outstanding principal taxes, relating to tax periods up to 31 December, 2023,’ says the audit report.
‘This was contrary to the Tax Procedures (Amendment) Act, 2024, which requires that, to qualify for amnesty, a taxpayer must have either fully paid all principal taxes or have an approved payment plan under which the outstanding principal taxes would be fully settled by 30 June, 2025.’
Under the law, taxpayers qualify for amnesty after settling the principal tax or tabling an approved payment plan that guarantees full settlement of the principal before June 30, 2025.
The audit, however, indicates that these conditions were not met, yet the penalties were written off.
The programme was first introduced in 2023, granting tax amnesty on penalties and interest for periods up to the end of December 2022. It initially ran until June 2024 before being extended to June 30, 2025, allowing for the waiver of penalties and interest accrued on tax debts for periods up to the end of December 2023.
The KRA has in the past praised the programme for generating Sh29 billion while bringing 3.5 million taxpayers into compliance-a performance it termed as ‘a proof to our balanced approach of enforcement and facilitation.’
The audit findings raise questions on the credibility of the amnesty programme, which was designed to encourage tax compliance while helping the KRA collect principal taxes.
The audit further raises red flags over how the amnesty was implemented in the tax system. It found that there was use of direct record deletions instead of standard accounting procedures, where the trail must remain visible in the system.
The audit found that tax relief amounting to Sh1.29 billion was processed through direct deletion from taxpayers’ ledgers instead of processing them through credit entries.
‘Further, a tax amnesty of Sh1,288,365,274 was implemented by direct deletion from taxpayer ledgers rather than being offset through credit entries. ln the circumstances, management was in breach of the law,’ said the audit.
Under accounting rules of double entry, the tax amnesty should have been recorded as a credit against a taxpayer’s account, preserving an audit trail that shows the original liability, the relief granted and the resulting balance. Direct deletion removes the liability without leaving a clear record of the adjustment, making it difficult to track the application of the amnesty across individual accounts.
The tax amnesty programme was intended to unlock collections from non-compliant taxpayers as part of the country’s tax administration reforms aimed at expanding the revenue base and reducing reliance on debt.
The spotlight on the handling of the amnesty programme came in the period Auditor-General Nancy Gathungu disclosed that the KRA had issued tax compliance certificates (TCCs) to 3,054 taxpayers despite them having Sh3.12 billion tax arrears and without a payment plan in place.
The report indicates that the affected taxpayers had not objected to the tax assessments or entered into any structured payment plans-conditions that would have allowed them to legally qualify for the certificates.
Ms Gathungu’s findings come at a time when the government is under pressure to boost revenue collection amid rising fiscal constraints and public scrutiny over tax fairness.
State House has previously accused the tax collection agency’s staff of cutting government revenue by engaging in corruption, colluding with tax evaders and taking bribes.
President William Ruto also accused KRA staff of resisting and sabotaging attempts to digitise revenue collection in the past to prevent the government from sealing loopholes.
In terms of tax collected as a proportion of annual economic output, Kenya has been underperforming other nations like South Africa as it struggles to widen the tax net.
The KRA’s revenue collections were Sh2.257 trillion in the financial year ended June 2025 against the targeted Sh2.305 trillion, being a Sh48 billion shortfall.
In the current financial year ending June 2026, the KRA is banking on increased deployment of technology and other enforcement tools to raise Sh932 billion in the final three months in a bid to meet its Sh2.97 trillion annual revenue target.
The aggressive final-quarter push comes after the agency collected Sh2.038 trillion by the end of March, the first time it has crossed the Sh2 trillion mark within nine months.