Economy

KRA to track mobile money transactions in tax cheats purge

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A Safaricom's M-Pesa app user. PHOTO | DIANA NGILA | NMG

Mobile money transactions will now be on the Kenya Revenue Authority’s (KRA) radar after it links its system to telecommunication companies as the taxman moves to increase tax compliance.

KRA will be tracking the 16 percent value-added tax (VAT) on sales as well as the 20 percent excise duty charged on transactions. Customers also pay a 20 percent excise duty on airtime.

Integrating the systems is one of the reforms under the revenue administration, as it targets to hit a Sh3 trillion tax collection target in the 2023/2024 budget.

Read: KRA nets 70,000 tax cheats from third party data sources

“As part of the economic turnaround plan, the government will scale up revenue collection efforts by the Kenya Revenue Authority (KRA) to Sh3 trillion in the Financial Year 2023/24 and Sh4 trillion over the medium term,” said Treasury in the draft 2023 Budget Policy Statement released Wednesday evening.

Mobile money transactions started in 2007 as a means of sending money between friends and relatives but have since evolved to include payment of bills and government services, with banks riding on this financial technology to mint billions in fees through mobile banking.

According to Central Bank of Kenya data, there were 73.2 million mobile money accounts as at November 2022, with the value of transactions standing at Sh639.84 billion.

Linking the taxman’s system will give it visibility of real-time mobile money transactions and a rare peak into Kenyans’ lifestyles.

By the end of 2021, the amount of money transacted on mobile phones was more than half of all the goods and services produced in the economy, or gross domestic product (GDP).

A bulk of these transactions, over 80 percent, were carried out on M-Pesa, Safaricom’s mobile money transfer service.

As part of its wider strategy to expand the tax base, the KRA says it will rely more on technology to identify people earning and living large and not paying taxes.

KRA is seeking to match data from third parties such as telcos and betting firms, capturing the flow of cash against tax remittances in the race to nab those evading duty payments.

The taxman has already hooked 16 betting companies on its system to allow real-time computation of taxes, a move that will see the firms pay taxes on betting, gaming, lottery and winnings by 1am daily.

Read: KRA hooks second batch of top 10 betting firms on its system

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