The manufacturing sector has broken into the top three most tax-compliant bracket, displacing transportation and storage from top-tier sectors in corporate income tax (CIT) payments for firms already in the tax net.
Data from the Kenya Revenue Authority (KRA) shows that manufacturing ranked third in on-time corporate tax payments for the financial year ended June 2025, recording a compliance rate of 77.09 percent.
Factories joined companies engaged in real estate activities and financial and insurance firms, which maintained their lead in tax discipline at 80.01 percent and 79.51 percent, respectively. In contrast, transportation and storage, which held third place in the 2023-24 fiscal year with a 76.07 percent compliance rate, dropped out of the top bracket.
The manufacturing sector’s stronger tax compliance coincided with renewed momentum in industrial activity, as shown in the latest quarterly data by the Kenya National Bureau of Statistics (KNBS).
Non-food manufacturing recorded gains in the second quarter of 2025, signalling renewed investor confidence, growing domestic demand, and steady capacity utilisation across factories.
Firms engaged in cement production raised output by a fifth (21 percent) to 2.47 million metric tonnes from 2.04 million tonnes in the same period last year, while production of galvanised sheets rose 11.3 percent to 77,200 tonnes.
The KNBS data further shows motor vehicle assembly increased 20.8 percent to 3,350 units in three months to June from 2,773 units a year earlier.
The KRA data, however, shows that firms in the real estate sector were the most tax-compliant for the second year in a row, posting the highest on-time payment rate of CIT at 80.01 percent in the 2024-25 financial year, up from 77.55 percent a year earlier.
The developers and landlords in the tax net were followed by those in the financial and insurance sector, which had an 79.51 percent on-time payment rate.
At the same time, the KRA data show that the financial services sector led in on-time filing of the annual corporate tax returns, registering a compliance rate of 74.20 percent, ahead of energy (74.16 percent) and construction (74.03 percent).
Firms in banking and insurance services beat those in the energy sector, which had topped the annual CIT filing chart the previous year ended June 2024 at 74.02 percent, followed by finance (73.61 percent) and construction (73.55 percent).
This came in a period when the KRA reported that 461,969 firms-about 74.73 percent or three out of four companies-did not remit any money due to profitability.
The proportion of firms that skipped CIT payments in the year to June 2025 grew from 401,274 of 556,329 registered firms last year, or 72.13 percent.
The KRA numbers suggested that an overwhelming share of companies in the tax net were either genuinely loss-making or had mastered the art of tax planning. Tax experts say the gap between registered firms and taxpayers cannot be explained by business losses alone.
Stephen Waweru, a senior manager for tax services at KPMG, said the numbers highlight structural and behavioural challenges in corporate tax compliance.
‘Many firms are registered, many file returns, but relatively few actually pay instalments,’ he told the Business Daily.
‘The level of compliance seems to be improving, but it still falls far below what one would expect if firms in the tax net were largely profitable.’
Mr Waweru says this could be explained by the share of businesses-especially small and medium-sized enterprises or new entrants-that are genuinely loss-making, often squeezed by high inflation, rising input costs, exchange rate swings, and supply chain disruptions.