The Kenya Revenue Authority (KRA) has announced that it will link its system to telecommunication companies to increase tax compliance and reach its Sh3 trillion tax collection target for the 2023/2024 budget. This move will enable the KRA to track the 16 percent value-added tax (VAT) on sales and the 20 percent excise duty charged on mobile money transactions.
Mobile money transactions, which started as a way to send money between friends and relatives in 2007, have since evolved to include payment of bills and government services. Banks have also begun to use this financial technology to earn billions in fees through mobile banking. According to data from the Central Bank of Kenya, there were 73.2 million mobile money accounts as of November 2022, with transactions valued at Sh639.84 billion.
By linking the taxman’s system to telecommunication companies, the KRA will gain visibility of real-time mobile money transactions, providing a rare peak into Kenyans’ lifestyles. The amount of money transacted on mobile phones was more than half of all the goods and services produced in the economy, or gross domestic product (GDP), by the end of 2021. A bulk of these transactions, over 80 percent, were carried out on M-Pesa, Safaricom’s mobile money transfer service.
It aims to expand its tax base by utilizing technology to identify individuals with substantial income yet evading taxes. To achieve this, the KRA will gather data from external sources such as telecommunications and betting companies to compare cash flow against tax payments to detect those who avoid paying their dues. The KRA has already connected with 16 betting companies to enable real-time calculation of taxes, ensuring that the firms pay taxes on betting, gaming, lottery, and winnings by 1 am every day.
The Kenya Revenue Authority (KRA) has taken steps to integrate its system with telecommunication companies to achieve its Sh3 trillion tax collection target for the 2023/2024 budget. The government plans to increase revenue collection efforts by the KRA as part of its economic turnaround plan. It’s targeting to reach a total collection of Sh3 trillion in the Financial Year 2023/24 and Sh4 trillion in the medium term, as stated in the draft 2023 Budget Policy Statement released by the Treasury on Wednesday evening.
KRA’s linking its system to telecommunication companies is a significant step towards increasing tax compliance and reaching revenue collection targets. The integration will provide the KRA with valuable real-time data on mobile money transactions, allowing it to identify and target those who are not paying their fair share of taxes. Additionally, the KRA’s plan to rely more on technology to match data from third parties such as telcos and betting firms will help it capture the cash flow against tax remittances and nab those evading duty payments.