Economic Advisor Moses Kuria Reveals How Govt Plans to Expand Tax Base

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Economic Advisor Moses Kuria Reveals How Govt Plans to Expand Tax Base
Economic Advisor Moses Kuria Reveals How Govt Plans to Expand Tax Base

Africa-Press – Kenya. The government is set to roll out a new plan targeting tax evasion, by requiring small businesses to use paybills and tills as virtual electronic tax registers (ETRs).

From December, every business transaction processed via these digital payment methods will automatically be recorded for taxation purposes, marking a shift in how taxes are collected across the informal sector.

Moses Kuria, Senior Economic Advisor, revealed that this system will help the taxman capture more revenue from informal businesses. Kuria stressed that the move is part of a broader effort to widen the tax base and ensure that all businesses contribute their fair share.

He highlighted that, despite 16 million Kenyans working in the informal sector, KRA only collects Ksh12 billion in income tax from them, compared to Ksh500 billion from the 3 million formally employed citizens.

Kuria stated, “By Christmas 2024, all paybills will function as virtual ETRs. This will ensure that no business can evade tax, regardless of size.” The government is banking on this digital shift to close tax loopholes and address the imbalance in tax collection between the formal and informal sectors.

Since the introduction of ETRs in 2005, they have played a crucial role in streamlining VAT collection and curbing tax evasion. However, the shift towards using digital payment platforms as virtual ETRs represents a major evolution in tax collection strategies, one that could transform the country’s tax landscape.

Currently, the VAT Regulations 2020 mandate businesses to use electronic tax registers (ETRs) to record transactions. Under the existing system, businesses must manually input tax data, which has left room for discrepancies and underreporting. The integration of paybills and tills into the taxation system will automate this process, reducing human error and deliberate tax evasion.

Kuria further emphasised the need for all Kenyans to pay taxes, hinting that this new approach could eventually lead to lower income taxes for those already paying. “Once these informal businesses join the tax bracket, we may be able to reduce the burden on the 3 million who are currently bearing the weight of taxation,” he said.

One of the key drivers of this decision is the realisation that KRA currently has around 200,000 ETR devices in operation, while mobile payment systems, such as those used by major telcos and banks, have over two million digital touchpoints. This tenfold difference illustrates the untapped potential of mobile payments in driving tax compliance.

“There will be nowhere to hide. Our digitised economy puts us miles ahead of other nations, and we will fully exploit this to ensure every business pays its dues,” Kuria confidently declared.

Central Bank of Kenya data underscores the significance of mobile payments in the country, with 78.64 million registered mobile money accounts as of August 2024. Additionally, there are approximately 400,000 paybills and tills in operation, offering the government a powerful tool to monitor transactions and capture previously lost revenue.

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