The Kenya Revenue Authority (KRA) plans to roll out a WhatsApp chatbot that will enable taxpayers to generate electronic tax invoices using the popular the messaging app in a bid to further boost voluntary tax compliance, especially among small traders.
The initiative, said the KRA, is meant to further simplify tax invoicing using the newly introduced electronic tax invoice management system (eTIMS), especially for micro, small, and medium enterprises (MSMEs), and curb tax evasion.
A WhatsApp chatbot is an artificial intelligence-enabled computer programme that simulates text-based human conversation via the messaging platform.
The chatbots can automatically respond to various customer communications and can be integrated via the WhatsApp Business platform, which allows businesses to communicate with their customers on the app.
The chatbot will enable traders to send a message via WhatsApp to facilitate the electronic tax invoice.
KRA’s Chief Manager for eTIMS at the Domestic Taxes Department, Hakamba Wangwe, told the Business Daily that the programme is currently being tested and should be rolled out before the end of this financial year.
“The implication of this programme is the simplification of tax processes. With the bot, you will be able to generate a tax invoice as easily as you can send a message, a video, or a photo through WhatsApp,” she said, without giving details.
A recent internal KRA document showed that only 120,000 registered taxpayers with business income signed up to eTIMs in the year to June, representing 18.1 percent of about 663,000 firms in taxman’s books.
This means an estimated 543,000 or 81.9 percent of firms in the KRA register did not subscribe to eTIMs, which is mandatory to support deduction of business expenses for corporate income tax purposes.
The system, which requires businesses to file receipts or invoice with KRA as proof of expenses, is aimed at widening the tax base as big companies report to the authority small firms that act as their suppliers.
It also helps curb the practice where big firms inflate their sales and narrow profits in the push to pay lower taxes.
Tax consultants largely attribute the low uptake of eTIMS for the majority of smaller firms to lack of the technical infrastructure or understanding for compliance.
Stephen Waweru, a senior manager for tax services at consultancy and audit firm KPMG, said the slow start could be linked to inadequate training and support offered to small businesses, which form the majority of companies in the country.
“This may be attributed to lack of awareness, technical difficulties, or resistance from businesses due to the perceived complexity of the new system,” Mr Waweru said.
“This performance could also be viewed as a natural outcome of a phased rollout where early adopters, usually larger or more compliant businesses, sign up first, while smaller or more reluctant businesses follow later.”
The planned use of AI chatbots is part of the taxman’s efforts to widen the tax bracket, especially by netting non-compliant MSMEs, which are largely informal businesses and are traditionally considered hard-to-tax sectors.
This comes after multiple complaints from businesses, especially non-tech-savvy small traders, about the complexity of the recently launched system, forcing many of them to snub it, further driving up non-compliance with tax requirements.
The system requires all business transactions to be recorded with the taxman, through an electronically generated invoice which automatically alerts the KRA of a value-added or income tax liability on the part of the seller or service provider.
New regulations demand that businesses accompany an eTIMS-generated tax invoice with all their tax-deductible expenses, forcing suppliers and service providers to comply or otherwise lose business.
The new system requires that all business expenses are supported by eTIMS invoices or bills, failing which companies will be subjected to 30 percent tax on corporate earnings.
Receipts from the domestic VAT stream amounted to Sh313.37 billion for the year ended June 2024, data kept by the Treasury shows, overshooting the target by Sh5.54 billion.
The KRA views the rollout of the eTIMS as a game changer that will finally make VAT the topmost revenue generator, leapfrogging income tax.
