Safaricom says it is deeply concerned by the state’s plans to convert mobile payment bills and turn numbers into a tax collection registry to weed out tax evaders and raise revenues by billions of shillings.
The telco says the government should be careful not to impact progress on digitizing payments even as it seeks to broaden the tax base, warning that this could hurt the use of M-Pesa bills and numbers.
The operator issued this warning amid continued adoption of the M-Pesa platform, especially the subscription to Pochi la Biashara – a product that allows small business owners, including food vendors and matatu operators, to separate business from personal finances.
“We are the largest taxpayers, so we are very aware of the need to pay taxes, but also for our customer base, we are also aware that this country has made significant progress in digitalization, and therefore we need to ensure even when the authorities try to do so,” said Peter Ndegwa, CEO, Safaricom. Plc: “We plan to expand the tax base, and we will not back away from some of the benefits we have seen in digitalization.”
The state plans to declare all payment invoices as virtual electronic tax receipts in new efforts to expand the tax base.
This means that mobile money transactions undertaken by traders will be almost similar to an eTims (electronic tax invoice management system) receipt and the basis for calculating taxes.
The statement comes as the state seeks to have the Kenya Revenue Authority (KRA) integrate its system with the financial systems of mobile phone operators to catch those who do not pay taxes on their income.
The government pointed to the disparity between an estimated 200,000 businesses with electronic tax records (ETRs) and 2 million businesses using payment invoices as digital payment points across the country.
Initially, this will target businesses that generate more than five million shillings in annual sales, suggesting that it targets informal sector traders who are outside the scope of the KRA.
An ETR is a cash register with a financial memory that keeps a record of all transactions for the purposes of the trader’s accounting for the value added tax (VAT) charged at the time of sale – which is monitored in real time by the tax official.
The government cited a low uptake of physical electronic transaction records, which VAT-registered taxpayers were required to purchase to enable tax officers to track tax payment from sales.
M-Pesa transactions
Safaricom says it is engaging Kenyan authorities to ensure that the reforms do not curtail efforts to digitize the economy.
“We continue to engage the appropriate authorities and regulators to ensure that it meets all the needs of our customers, especially small businesses,” Mr Ndegwa said.
Safaricom, the leading telecommunications company, whose M-Pesa platform covers almost all mobile money payments in the country, is at the center of the desired integration.
The value of transactions on the M-Pesa platform rose 10.7 percent to Sh20.9 trillion in the six months to September from Sh18.8 trillion in the same period last year.
Meanwhile, M-Pesa transaction volume rose 30.6 percent to 17.1 million from 13.1 million.
The platform has also seen an expansion in its merchant network, with the number of Lipa Na M-Pesa farmers (payment bill and income figure) rising slightly to 658,700 as of September 2024 from 658,400 even at the same time last year.
Pochi subscriptions doubled to 869,000 from 405,200 previously.
Safaricom withdrew Sh77.2 billion from M-Pesa in the six months, up from Sh66.2 billion previously, mainly driven by an increase in fee-based transactions.
Feeable transactions per customer active for one month increased by 25.6 percent to 37.4 transactions from 29.8 transactions previously.
Efforts to integrate M-Pesa systems with KRA systems seek to increase compliance on the payment of VAT from sales and counter the stagnation caused by low uptake of physical electronic transaction records.
Individuals or businesses providing taxable goods or services worth Sh5 million or more per year must register for VAT and be listed under eTIMS.