3 min read

Kenya to Link M-PESA Paybills to Tax System

October 11, 2024

Kenya to link M-PESA paybills to tax system as virtual Electronic Tax Registers (ETRs) by December 25, 2024.

This initiative, part of the country’s broader tax reforms, aims to widen the tax base and curb evasion.

By integrating mobile money transactions with tax systems, the Kenya Revenue Authority (KRA) hopes to enhance transparency and efficiency in tax collection.

Moses Kuria, Senior Economic Advisor to President William Ruto, shared the news during a tax summit, emphasising the government’s commitment to utilising Kenya’s digital payment infrastructure for tax purposes.

“Come Christmas 2024, all paybills will also be virtual ETRs for tax collection,” Kuria stated, underscoring that there would be no exceptions.

This move could face resistance from traders who frequently use mobile money, as they might see it as an additional burden.

The decision is based on the disparity between the number of registered ETR devices and the massive number of digital transactions that occur every day.

Integrating M-PESA Paybills

While there are over 2 million digital payment touchpoints across Kenya through banks and telecommunications platforms, only around 200,000 merchants currently use ETR devices to record Value Added Tax (VAT) payments.

Integrating M-PESA Paybills into the tax system would effectively increase the number of tax-registered touchpoints by tenfold.

Kuria stated that Kenya’s extensive digitisation of payments puts it in a strong position to successfully implement this new tax initiative.

He noted that, in contrast to other countries where digital payment adoption has been challenging, Kenya’s population — irrespective of education level — has embraced mobile money platforms like M-PESA.

“We have decided that there will be nowhere to hide for anybody. We already have a huge advantage because of the widespread digitisation of payment systems,” Kuria said, explaining that even individuals with limited formal education have adopted digital payment methods.

KRA Commissioner General Humphrey Wattanga also addressed the summit, noting the potential of modern technologies such as the Internet of Things (IoT), artificial intelligence (AI), and blockchain to streamline tax processes further.

“Our ongoing policy reforms and modernisation efforts will enhance revenue mobilisation through improved efficiency and compliance,” he added.

As Kenya moves towards integrating mobile money into its tax system, the government expects to capture more revenue from previously unregistered transactions, helping to close tax loopholes and foster greater accountability.

Leave a comment and follow us on social media for more tips: