(NAIROBI, KENYA) – Kenya’s tourism levy collections fell KES 1.004 billion ($7.75 million / GBP 5.79 million) short of target in the year to June after regulations to bring Airbnb rentals, homestays and villas into the tax system failed to take effect.
The Tourism Fund collected KES 5.646 billion ($43.58 million / GBP 32.55 million) against a KES 6.65 billion ($51.33 million / GBP 38.34 million) target in the 2025/26 financial year, according to data submitted to the State Department for Tourism.
The KES 1.004 billion shortfall was the largest recorded in recent years and marked a significant deterioration from the previous financial year, 2024/25, when collections missed the KES 5.5 billion ($42.45 million / GBP 31.71 million) target by KES 400 million ($3.09 million / GBP 2.31 million).
The agency attributed the shortfall to the failure to gazette regulations that would have expanded levy collection to short term accommodation operators.
“The Fund had anticipated having regulations that would enable collection of levies from Airbnbs, homestays and villas during the financial year, but the same were not gazetted, hence the shortfall,” the report says.
The disclosure highlights the growing challenge of capturing Kenya’s expanding short term rental market under a levy system largely designed around conventional hotels and other licensed tourism establishments.
It also exposes differences over whether new regulations are needed before the levy can be collected from digital platforms.
Tourism Fund chairperson Samson Some said in January that there was no legal obstacle to collecting the charge from digital platforms, arguing that the bigger challenge was identifying and tracking short term rental operators.
“There is no legal gap,” Mr Some said in an interview. “The systems we had were built for traditional hotels, restaurants and bars. What has changed is the entry of digital platforms and short term rentals, which the old systems were not designed to capture.”
Under the tourism law, regulated hotels, restaurants and other licensed tourism establishments pay a 2% tourism levy on gross sales.
The levy is payable monthly, with failure to remit by the 10th of the following month attracting a KES 5,000 ($38.60 / GBP 28.83) fine and a 3% penalty on the outstanding amount for every month it remains unpaid.
Short term rentals have complicated enforcement, particularly where individual operators manage multiple properties without operating from conventional hotel premises.
“You may have someone running 10 units on one floor of a residential block while the rest of the building is private housing,” Mr Some said. “Without the right digital system, you may not even identify the operator, let alone enforce levy collection.”
The latest figures show how the revenue gap has emerged as annual targets have increased.
Collections exceeded the target by KES 1.12 billion ($8.65 million / GBP 6.46 million) in 2021/22, when KES 2.81 billion ($21.69 million / GBP 16.20 million) was raised against a KES 1.69 billion ($13.05 million / GBP 9.74 million) target.
The surplus narrowed to KES 690 million ($5.33 million / GBP 3.98 million) in 2022/23, with collections of KES 3.9 billion ($30.10 million / GBP 22.48 million) against a KES 3.21 billion ($24.78 million / GBP 18.51 million) target, before falling to about KES 150 million ($1.16 million / GBP 0.87 million) in 2023/24.
Collections then dropped below target in 2024/25, when KES 5.1 billion ($39.37 million / GBP 29.40 million) was raised against a target of KES 5.5 billion, leaving a KES 400 million gap.
Although collections rose by KES 546 million ($4.21 million / GBP 3.15 million) last year, the annual target increased by KES 1.15 billion ($8.88 million / GBP 6.63 million), meaning revenue growth was insufficient to match the higher expectations.
The stalled expansion of the levy base comes as the tourism industry increasingly includes accommodation booked outside traditional hotels, raising the stakes for the authorities to find a workable collection mechanism.
Mr Some said the proposed solution is to shift collection towards digital transactions rather than relying on physical identification and follow up of individual operators.
Under the proposed model, the levy would be deducted when a guest makes a booking, with the platform remitting the amount directly to the agency.
“If $100 (about KES 12,962 / GBP 173.53) is collected from a guest, a percentage is remitted directly through the system,” Mr Some said. “That way, we don’t have to chase operators to their residences or follow properties that keep shifting locations. The levy is collected at source.”
The approach would move enforcement from individual properties to booking platforms, potentially giving authorities access to transactions that are difficult to identify through conventional inspections.
Other countries have adopted similar approaches. Rwanda requires accommodation providers, including short term rental operators using platforms such as Airbnb, to pay tourism tax based on guest payments.
South Africa has also pursued a data driven approach in which platforms can provide authorities with transaction information, including host identities, earnings, property addresses and rental periods.