Kenya Leans on eTIMS to Widen the Tax Base as Budget Pressure Mounts
As Kenya prepares a Sh4.7tn budget, attention turns to how digital tax systems can bring more taxpayers into the net
Kenya is moving to deepen the use of digital tax systems as it prepares a Sh4.7 trillion budget for the 2026/27 financial year, with policymakers under pressure to bring more taxpayers into the net. Tax experts say tools like the electronic Tax Invoice Management System, or eTIMS, will be central to improving compliance and reducing reliance on a narrow group of contributors.
Speaking at a pre-budget briefing by Ernst & Young, tax partner Francis Kamau said the current structure is heavily imbalanced, with a small segment of taxpayers carrying most of the burden despite millions being registered.
A narrow pool carries the tax burden
Official figures show more than 19 million registered taxpayers and over 22 million PIN holders, yet only about 3 million individuals in formal employment and roughly 10,000 companies account for most tax revenue.
Kamau said this gap reflects long-standing structural weaknesses in compliance and enforcement. It also raises concerns about sustainability as spending targets increase.
“About 3 million taxpayers are effectively supporting close to 19 million who should be paying taxes.”
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eTIMS adoption rises but usage lags
The Kenya Revenue Authority has expanded onboarding to the eTIMS platform, with uptake growing from about 323,000 users in September 2024 to over 500,000 by late 2025. Early resistance and technical hurdles slowed initial adoption, with participation below 1 percent of eligible businesses at the start of 2024.
Even among those registered, consistent use remains uneven. Roughly 49 percent of onboarded users actively transmit invoices through the system, limiting its effectiveness in tracking real-time transactions.
Sector-specific rollout has also been gradual. In the fuel industry, just over 500 stations had joined the eTIMS module by early 2026, representing about 16 percent of the market.
Real-time data tightens enforcement
Authorities have begun linking tax return validation directly to eTIMS data from January 2026. This means expenses that lack compliant electronic invoices may be rejected, increasing pressure on businesses to adopt the system fully.
The approach is designed to match declared income with actual transaction records, reducing underreporting and improving audit accuracy.
Compliance, not registration, now the focus
Tax experts say the next phase will depend less on how many businesses register and more on whether they consistently use the system. Without regular data transmission, the digital infrastructure cannot deliver its intended gains.
As the government prepares its largest budget yet, the success of digital tax enforcement will shape how much revenue can be raised without increasing rates.
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