NAIROBI, Kenya – Starting December 25, 2024, all digital payment systems in Kenya, including M-Pesa and bank pay bills, will officially be classified as virtual Electronic Tax Receipts (ETRs), according to a new government policy aimed at expanding tax revenue.
This move is part of a broader effort to tighten the country’s tax collection, leveraging its robust digital payments ecosystem.
Moses Kuria, a former Cabinet Secretary and current Senior Economic Advisor to President William Ruto, emphasized the significance of this policy change during a recent address.
He urged stakeholders to inform users about the impending changes, which will bring mobile payments under the same regulatory framework as traditional ETR systems.
“Come Christmas 2024, all pay bills will also be virtual ETRs for purposes of KRA,” Kuria stated, referring to the Kenya Revenue Authority (KRA).
He also noted that the initiative is part of KRA’s strategy to tap into the country’s substantial digital transaction footprint.
Despite the nation’s rapid adoption of mobile money and digital banking, only 200,000 ETR devices are currently registered— a small fraction compared to the estimated 2 million digital payment “touchpoints” used daily by Kenyans.
This policy shift means that payments made via platforms like M-Pesa and bank tills will be treated as eTIMS (Electronic Tax Invoice Management System) receipts, enabling their use for tax deduction purposes.
Kuria described the move as an “early harvest” of potential tax revenue from Kenya’s expanding digital economy, underscoring the government’s intent to broaden the tax base.
Safaricom, Kenya’s leading telco, reported 633,000 active Lipa Na M-Pesa merchants in its most recent financial results, while Equity Group boasts over 1.1 million Pay with Equity merchants across six countries.
The sheer scale of digital transactions provides a substantial opportunity for the government to increase tax compliance.
Kuria pointed out a stark disparity in income tax contributions between Kenya’s formal and informal sectors.
Of the 19 million Kenyans in the workforce, only 3 million work in the formal sector, which contributes a significant 500 billion Kenyan shillings in income taxes annually.
By contrast, the informal sector, comprising 16 million individuals, contributes just 12 billion shillings.
“How can 3 million people disproportionately carry the burden on behalf of 16 million who are virtually not contributing in terms of income taxes?” Kuria questioned, calling for a more equitable tax distribution.
This initiative is part of a broader tax reform agenda spearheaded by Treasury Cabinet Secretary John Mbadi, who announced a series of overhauls to Kenya’s tax systems.
Set to begin in November, these reforms will include an upgrade to the iTax platform and a revamp of the Integrated Customs Management System (iCMS) to address revenue leakages.
Mbadi also highlighted the gaps in tax visibility for professional services like law and medicine, where income often goes unreported.
Additionally, the government aims to raise KES 100 billion annually in rental income taxes by closing existing loopholes in the system.
This move is part of a broader effort to tighten the country’s tax collection, leveraging its robust digital payments ecosystem.
Moses Kuria, a former Cabinet Secretary and current Senior Economic Advisor to President William Ruto, emphasized the significance of this policy change during a recent address.
He urged stakeholders to inform users about the impending changes, which will bring mobile payments under the same regulatory framework as traditional ETR systems.
“Come Christmas 2024, all pay bills will also be virtual ETRs for purposes of KRA,” Kuria stated, referring to the Kenya Revenue Authority (KRA).
He also noted that the initiative is part of KRA’s strategy to tap into the country’s substantial digital transaction footprint.
Despite the nation’s rapid adoption of mobile money and digital banking, only 200,000 ETR devices are currently registered— a small fraction compared to the estimated 2 million digital payment “touchpoints” used daily by Kenyans.
This policy shift means that payments made via platforms like M-Pesa and bank tills will be treated as eTIMS (Electronic Tax Invoice Management System) receipts, enabling their use for tax deduction purposes.
Kuria described the move as an “early harvest” of potential tax revenue from Kenya’s expanding digital economy, underscoring the government’s intent to broaden the tax base.
Safaricom, Kenya’s leading telco, reported 633,000 active Lipa Na M-Pesa merchants in its most recent financial results, while Equity Group boasts over 1.1 million Pay with Equity merchants across six countries.
The sheer scale of digital transactions provides a substantial opportunity for the government to increase tax compliance.
Kuria pointed out a stark disparity in income tax contributions between Kenya’s formal and informal sectors.
Of the 19 million Kenyans in the workforce, only 3 million work in the formal sector, which contributes a significant 500 billion Kenyan shillings in income taxes annually.
By contrast, the informal sector, comprising 16 million individuals, contributes just 12 billion shillings.
“How can 3 million people disproportionately carry the burden on behalf of 16 million who are virtually not contributing in terms of income taxes?” Kuria questioned, calling for a more equitable tax distribution.
This initiative is part of a broader tax reform agenda spearheaded by Treasury Cabinet Secretary John Mbadi, who announced a series of overhauls to Kenya’s tax systems.
Set to begin in November, these reforms will include an upgrade to the iTax platform and a revamp of the Integrated Customs Management System (iCMS) to address revenue leakages.
Mbadi also highlighted the gaps in tax visibility for professional services like law and medicine, where income often goes unreported.
Additionally, the government aims to raise KES 100 billion annually in rental income taxes by closing existing loopholes in the system.
