Mobile payment bills and number accounts will be converted into electronic tax records (ETRs) from the end of December to weed out tax evaders and boost revenue by billions of shillings, President William Ruto’s senior economic advisor has said.
Musa Kuria, former Cabinet Secretary, said there are plans to declare all salary bills from December 25 as virtual electronic tax receipts in new efforts to expand the tax base.
Mr. Correa was recently appointed as a senior member of the President’s Council of Economic Advisers.
His statement indicates that transactions on mobile money payments for traders will be almost similar to receiving an electronic tax invoice management system (eTIMS) and the basis for calculating taxes.
The revelation comes as the country races to get the Kenya Revenue Authority (KRA) to integrate its system with the financial systems of mobile phone operators to catch those who do not pay taxes on their income.
Correa pointed to the disparity between the estimated 200,000 companies with electronic records for electronic transactions and the 2 million companies using payment invoices as digital payment points across the country.
“We have agreed with the Commissioner-General that by Christmas 2024, all payment invoices will also be virtual EMRs for KRA (revenue collection) purposes. I know there will be some noise, but I also want you to tell me where we have agreed that someone will not By paying taxes? “Maybe I missed the point,” Correa said at the KRA Tax Summit yesterday.
“Today in KRA, the number of people with VAT machines, ETR machines, is only 200,000. Combined, all the telcos and banks that do mobile payments have what we call digital touchpoints for payments – 2 million of them, which is 10 times the number of transaction records.” e-KRA and speaks to the tremendous opportunity we have in digitizing our revenue framework.” He added.
Correa did not provide further details about the plan, but President Ruto earlier said that the tens of millions of mobile money accounts in Kenya provide an opportunity to increase revenue.
For a start, this will target businesses with annual turnover of more than Sh5 million, an indication that it is targeting traders in the informal sector 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 accounting for the VAT charged at the time the sale is made – which is monitored in real time by the tax collector.
The government has raised concerns about the low uptake of physical electronic transaction records under which VAT registered taxpayers are required to purchase for the taxman to track tax payment from sales.
Any person or company that supplies or expects to supply taxable goods or services worth Sh5 million or more in a year must register for VAT.
Every VAT registered taxpayer is also required to be listed within the eTIMS system.
The Treasury is walking a funding tightrope after deadly protests forced the Ruto administration to abandon tax measures that would have raised Sh346 billion this year.
The International Monetary Fund has delayed funding that was expected to be disbursed this month after failing to reach an agreement with Kenya on future revenue plans following the withdrawal of the finance bill.
Safaricom is the leading mobile operator in Kenya, with most people using M-Pesa and other services to transfer cash, save, borrow and pay for goods and services.
The telco says it had 633,010 active merchants in Lipa na M-Pesa and another 632,680 in Pochi la Biashara at the end of March. The Treasury Department previously said that in addition to going after mobile money accounts, authorities will also seek to raise more consumption taxes and make sure landlords pay their fair share.
In order to shore up revenues, President Ruto’s administration has deepened its campaign against tax evasion.
The KRA has deployed hundreds of spies to conduct a series of background checks and lifestyle audits in new efforts to increase revenues and reduce reliance on borrowing.
Now, the country wants to cash in on transactions with more than 30 million registered customers of Safaricom’s M-Pesa and Airtel Money, transacting billions of shillings daily.
The KRA’s Enforcement Unit has in recent years enhanced the use of various databases to prosecute suspected tax fraud, including bank statements, import records, vehicle registration details, Kenyan energy records, water bills, and data from the Kenya Civil Aviation Authority (KCCA), Which detects individuals who own assets such as aircraft.
Vehicle registration details are also used to evict individuals who drive luxury cars but don’t have much to show in terms of remitted taxes.
Energy meter registrations in Kenya also help tax officers identify property owners, some of whom have been hit with huge tax demands.
The agency, which has consistently failed to meet ambitious revenue goals set by the Treasury Department, has traditionally relied on random audits to catch fraudsters.
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