The Kenya Revenue Authority (KRA) posted a 15.5 percent growth in tax collections in October as businesses recorded their first expansion in output in eight months, supported by stronger customer demand, rising sales and new orders.
Tax receipts amounted to Sh260.63 billion during the month, narrowly exceeding target of Sh258.304 billion by 0.9 percent.
The pace of the increase in collections was the fastest in at least two years, surpassing eight percent year-on-year growth in October 2025 and 6.5 percent in October 2024.
The stronger performance in both domestic and customs taxes coincided with an improvement in private sector business conditions, with the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rising to 52.5 in October from 51.3 in September.
A reading above 50 signals an improvement in business conditions from the previous month, with the October reading representing the strongest improvement recorded this year.
The improvement in business activity potentially provided a backdrop to the stronger tax collections for the taxman since the financial year started in July, particularly consumption taxes and levies on company earnings.
KRA Commissioner for Tax, Research and Analysis Alex Mwangi said the agency collected Sh1.01 trillion between July and October 2026, crossing the Sh1 trillion mark a month earlier than in previous financial years.
“This achievement reflects a positive trajectory in revenue mobilisation, with the Authority attaining the milestone a month earlier than in previous financial years,” Mr Mwangi said in a statement on Thursday.
“Customs recorded its highest-ever monthly revenue collection after collecting Sh94.793 billion in October 2026, the highest monthly collection in KRA history.”
The four-month collections represent about 30.9 percent of KRA’s Sh3.268 trillion full-year target, leaving the authority with Sh2.258 trillion to collect by June 2027.
The Stanbic Bank Kenya PMI survey, conducted between October 12 and 28, found that customer demand strengthened, with new orders increasing at the fastest pace in almost a year.
Findings of the monthly survey suggested that sales volumes across agriculture, manufacturing, construction, wholesale, retail, services and mining sectors increased for the fifth consecutive month.
Business output, on the other hand, expanded for the first time since February, although the overall increase remained modest.
Manufacturing recorded the strongest increases in output and new orders among the sectors monitored in the PMI survey, while firms across the private sector increased purchases of inputs to meet stronger demand.
KRA said domestic revenue contributed Sh165.447 billion in October, exceeding its target by Sh1.337 billion and growing 18.1 percent compared with the corresponding month last year.
Corporation tax, based on profitability, rose 31.6 percent to Sh23.932 billion against a target of Sh20.077 billion. Four sectors — electricity, manufacturing, transportation and wholesale — accounted for approximately 81 percent of corporation tax collections.
The four sectors recorded average instalment tax growth of 38.1 percent during the month, suggesting stronger business earnings and improved remittances from some of the economy’s major corporate taxpayers.
Domestic value added tax (VAT), collected on taxable goods and services, rose 22.1 percent to Sh33.367 billion, surpassing the monthly target by Sh45 million.
KRA said the improvement in VAT collections had gained momentum, with gross domestic VAT growth accelerating to 21.9 percent in September and October from 12.2 percent in July and August.
Domestic excise duty collections also grew 54.1 percent, surpassing the monthly target by Sh945 million, the authority said, without disclosing the actual or targeted collections.
This marked the first time in a prolonged period that the domestic VAT, which is largely levied on alcoholic and tobacco products, had exceeded its monthly target.
The increase was driven by higher remittances from manufacturers of wines and spirits, premium beer and tobacco, which recorded respective growth of 110.8 percent, 43.5 percent and 94.1 percent.
However, the recovery in business activity came alongside mounting cost pressures, with the PMI showing that input price inflation reached its highest level since November 2023, driven largely by fuel and transport costs.
Businesses also increased selling prices to protect profit margins, while cash-flow difficulties continued to constrain expansion, suggesting that stronger demand has yet to translate into an equally strong recovery across all firms.
