The government plans to transform mobile money paybill and till number accounts into electronic tax registers (ETRs) starting December 25, 2024.
This move aims to reduce tax evasion and increase revenue by billions of shillings, according to Moses Kuria, a senior economic adviser to President William Ruto.
Kuria, who was recently appointed as a member of the Council of Economic Advisors, stated that all paybills will be treated as virtual electronic tax receipts.
This initiative is part of efforts to widen the country’s tax base and capture more businesses that currently operate outside the tax system.
Under the new system, transactions made through mobile money platforms will resemble the receipts issued by the electronic tax invoice management system (eTIMS). While this change is intended to boost tax compliance, it may lead some users to reduce their use of mobile money services to avoid taxation.
The government is working to integrate the Kenya Revenue Authority (KRA) system with the financial platforms of mobile phone operators to identify individuals who do not pay taxes on their income. Kuria confirmed, “We have agreed with the Commissioner-General that come Christmas 2024, all paybills will also be virtual ETRs for tax collection.”
Currently, out of over 200,000 companies using mobile paybill services, only 2 million are registered with physical ETRs. This indicates a significant gap in potential tax revenue.
Kuria emphasized that the initial focus will be on businesses generating more than Sh5 million in annual sales.
President Ruto has previously highlighted the potential of Kenya’s large number of mobile money users to enhance revenue collection. H
e noted that with more than 2 million digital payment touchpoints through banks and telecommunications companies, there is an enormous opportunity for the government to improve digital tax collection.
Kuria pointed out that while implementing digital payments can be challenging in other countries, many Kenyans, regardless of their education level, have successfully adapted to using mobile money. The KRA is actively working to ensure that mobile money transactions will be treated similarly to electronic tax invoices, making it easier to track sales and compute taxes.
“We have agreed with the Commissioner-General that come Christmas 2024, all paybills will also be virtual ETRs for the purposes of [tax collection],” Kuria said.
“I know there is going to be some noise, but I also want you to tell me where we agree that someone will not pay taxes? Maybe I missed that point.”
This announcement comes at a time when the government is under pressure to increase funding after recently dropping several tax measures due to public protests.
What Are Electronic Tax Registers (ETRs) ?
ETRs were first introduced in Kenya in 2005 to streamline the collection of Value Added Tax (VAT) and reduce tax evasion. An ETR is a cash register with fiscal memory that records all transactions for VAT accounting at the time of sale.
In September 2020, the Treasury Cabinet Secretary gazetted regulations for the VAT (Electronic Tax Invoice Regulations), which established the use of Electronic Tax Invoices. The upgraded ETRs validate invoice data accuracy at the time of sale, allowing for real-time transmission of tax invoice copies to the KRA.
