M-Pesa Paybills to Become KRA Tax Registers by December 25 – Moses Kuria 

Mobile money paybill and till number accounts will be converted into electronic tax registers (ETRs) from the end of December to weed out tax evaders and boost revenue by billions of shillings, a senior economic adviser to President William Ruto has said.

Former Cabinet Secretary Moses Kurla said there were plans to declare all paybills from December 25, 2024 as virtual electronic tax receipts in fresh efforts to widen the tax base.

Kuria was to recently tapped as a senior member of the Council of Economic Advisors to the President.

His pronouncement indicates that transactions on mobile money payments of traders will be nearly similar to an electronic tax invoice management system (eTIMS) receipt and a basis for tax computation.

This may have a negative impact on the service provider at large as some users of the tills may scale down on the usage to avoid paying taxes.

The revelation comes as the State races to have the Kenya Revenue Authority (KRA) integrate is system with those of mobile phone operators’ financial platforms to catch those who do not pay tax on their incomes.

“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.”

The move targets traders who rely on mobile money platforms like Safaricom’s M-Pesa but have yet to be captured under the current tax system.

Currently, out of the over 200000 companies using mobile paybill services, only two million are registered with physical ETRs-a gap so big in revenue potential.

Kuria highlighted that this transition will initially focus on businesses earning more than Sh5 million in annual sales.

President Ruto has previously indicated that the country’s vast number of mobile money users presents a golden opportunity to enhance revenue collection.

According to him, the government can have access to over two million digital payment touchpoints across the country through Banks and Telcos, confirming that the Kenya Revenue Authority (KRA) is fully aligned with the plan.

“Because the base and will is there, we are now going to implement the pay bills and till numbers. The people who have devices for VAT, the ETR, are only 200,000.

“If you combined, all our banks doing mobile money and telcos, we have 2 million digital touchpoints. That is 10 times the number of ETRs at KRA. That speaks to the huge opportunity Kenya has to ensure the early harvest of digital tax,” he explained.

Additionally, the government advisor argued that while digitization of payments has proven to be a huge task in other countries, even the uneducated in Kenya have been able to navigate it.

KRA is already working on integrating its systems with mobile phone operators to catch income tax evaders.

As part of this effort, mobile money transactions will soon be treated similarly to an electronic tax invoice system (eTIMS), which will make it easier to track sales and compute tax.

This comes at a time when the government is under pressure to raise funds after dropping several tax measures in response to protests.

What are ETRs and Why are they Used?

ETRs were first rolled out in 2005 to streamline the collection of VAT and to minimize instances of tax evasion.

The ETR is a cash register with fiscal memory that keeps a record of all transactions for traders accounting of VAT charged at the time of making a sale.

However, in September 2020, the Cabinet Secretary Treasury gazetted The VAT (Electronic Tax Invoice Regulations), 2020 which introduced the implementation of the Electronic Tax Invoice.

The upgraded ETRs can check the accuracy of the invoice data generated at the time of making a sale through a validation process.

“As the customer is issued with their copy of the invoice, the electronic version of the tax invoice is transmitted to KRA over the internet on a real-time or near real-time basis,” KRA notes on its website.