Safaricom, Kenya’s leading telecommunications company, has expressed reservations about the government’s plan to convert mobile money paybills and till numbers into electronic tax registers (ETRs). This move, initiated by the Kenya Revenue Authority (KRA), aims to broaden the tax net and enhance tax compliance.

While the KRA’s intention is commendable, Safaricom argues that the conversion could potentially hinder the widespread adoption of M-Pesa and other digital payment solutions.

The company fears that additional regulatory burdens and compliance requirements could discourage businesses and individuals from using these convenient and efficient payment methods.

The Variation in Tax Compliance

The KRA’s decision to integrate mobile money platforms with its systems is driven by the significant difference between the number of businesses with ETRs and the number of paybill users. While only 200,000 businesses currently have ETRs, millions of Kenyans rely on mobile money for various transactions.

M-Pesa’s Continued Growth

Despite the looming regulatory changes, M-Pesa continues to exhibit robust growth. In the six months ending September, transaction values surged by 10.7% to Sh20.9 trillion. Additionally, Pochi la Biashara, M-Pesa’s business solution, has witnessed significant adoption, with sign-ups more than doubling to 869,000.

READ ALSO:

KRA’s AI-Driven Strategy to Tackle Tax Evasion

A Balancing Act

While acknowledging Safaricom’s significant contribution to Kenya’s tax revenue as the nation’s largest taxpayer, CEO Peter Ndegwa has expressed concerns about the potential impact of proposed tax reforms on the growing digital payment ecosystem.

The company is actively engaging with relevant authorities to ensure that any changes consider the needs of small businesses and promote continued growth.

The Focus on Small Businesses

The proposed integration of mobile money platforms into the tax system primarily targets businesses generating over Sh5 million annually. The aim is to enhance VAT compliance through real-time transaction monitoring, similar to the existing eTIMS system.

This move could have a significant impact on small businesses, particularly those relying on mobile money platforms for transactions.

Balancing Innovation and Regulation

The introduction of etims has significantly streamlined tax processes in Kenya, making compliance easier and more accessible for businesses. ETIMS Kenya enables businesses to automate and manage their invoicing in compliance with tax regulations, thus reducing manual errors and enhancing efficiency.

ETIMS payments are part of the system’s functionality, providing a seamless method for transactions while ensuring accurate tax remittance.

READ ALSO:

New Ratiba Feature on M-Pesa Hits Sh336M Milestone with a Million Users in One Month

The ETIMS KRA integration allows businesses to directly connect with the Kenya Revenue Authority for smoother, real-time updates. This cooperation between KRA ETIMS and businesses promotes transparency and accountability in financial reporting.

As Kenya strives to modernise its tax system and boost revenue collection, it is crucial to strike a balance between regulatory oversight and fostering innovation.

By implementing well-thought-out policies and providing adequate support, the government can ensure that digital payment solutions like M-Pesa continue to thrive and contribute to the nation’s economic growth.

It remains to be seen how the government will address Safaricom’s concerns and implement the ETR conversion in a manner that minimises disruption to the digital payment ecosystem.